Today’s trade idea for option traders: Bed Bath and Beyond (trade closed)
I think, everyone knows this company. At least, in the United States. The struggling retailer has been shrinking its portfolio and restructuring the business due to crass operating results in both 2019 and 2018. The good news is that BBBY is emerging from the pandemic with improved sales although investors should still expect a couple of tough few years ahead. And as the indicators are showing an up move, it’s worthwhile to try an options trade on this stock. So let’s check it out, 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 July (49 days)
Premium for 1 option: between $240 and $260 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 strik in the next 44 days.
– A dividend of 2.43% 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)
– A relative low Fear & Greed Index of 38
– A pretty high IV Rank (around 41) and IV Percentile (around 84%)
Cons for this trade:
– The long signal could turn out as a flash in the pan
– The company may pay a dividend but in total, it currently produces a loss (Source: finviz.com)
Result of this trade: you could close this position on 30th June for around $20
Realized profit for 1 option: $220 – $230
Realized profit in %: around 90%
Days in the trade: 33 (of maximum 49 days)
Summary: at this trade I got help. I’ve got help from all the people meeting on Reddit and other platforms to push stocks with a high short float. So just after a couple of days holding the put position on BBBY, you would have seen surging it like crazy. To admit, after this, the price came back very soon close to the strike but it kept swinging above it. And on the day you could close the position, it surged again. So, thank you!
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