Today’s trade idea for option traders: The Chemours Corp (trade closed)
After the Q4 2020 beat, Chemours jumped higher. CEO Mark Vergano: “Our COVID-19 response plan enabled Chemours to deliver robust Free Cash Flow as we prioritized cash and liquidity in a challenging demand environment. As the recovery gained momentum, we were ready to safely serve our customers and delivered fourth quarter sales performance nearly equal to pre-pandemic levels.” Good for us, the options traders. So let’s check this opportunity, folks.
The information I am giving you in this article is for informative purposes only and should not be treated as investment advice. The information presented would not be suitable for investors who are not familiar with exchange traded options. Any readers interested in trading activities related to the information in this article should do their own research and seek advice from a licensed financial adviser.
Type of a trade: Cash secured put (in the money)
Alternatively: Bull put spread
Expiration: 16th April (42 days)
Premium for 1 option: between $220 and $240 on the day this article was published
Margin: apprx. $460 on the day this article was published
Pros for this trade:
– A long signal (I’m using the ADX-Indicator), giving a higher probability that the price would stay above the strike in the next 42 days
– A dividend of 3.88% on the day the trade idea was published, in case the price would fall below the strike and you would get the stock assigned (Source: finviz.com)
Result of this trade: you could close the position on 5th April 2021 for around $30
Realized profit for 1 option: $206 – $215
Days in the trade: 31 (of maximum of 42 days)
Summary: another bumpy trade like the two past ones (on Vuzix and Virtu Financial). This is showing us that there are no best indicators existing giving us a 100% opportunity. What’s important, is either to have a strict exit strategy once things start to go wrong or to accept to get the stock assigned. I usually prefer to get the stock assigned because I usually pick stocks which are paying dividends or which are growing stocks providing a probability to rise again once the fell below the strike. With this strategy I reduce the risk to catch a crappy stock which turns out as a total flop. But of course, this is my personal opinion and you can (and even you should!) do it your own way.
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