Trade ideas

Today’s trade idea for option traders: Unum Group (trade closed)

(Last Updated On: 7. January 2022)

trade idea for option traders

As opposed to the winter and spring, this summer 2021 wasn’t really good for option sellers as the implied volatility was too low. Actually, it’s still too low. But with Unum Group, we now finally got a stock with a higher implied volatility as usual. That’s why I’d like to introduce my trade idea on this one. So let’s check it out!

Disclaimer:
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
Alternatively: Bull put spread
Expiration: 17th December (70 days)
Strike: $27.5
Premium for 1 option: between $155 and $170 on the day this article was published
Margin: apprx. $500 on the day this article was published (Please keep in mind: the margin size depends on your account size. The smaller your account size the higher the margin requirements. The margin I’m publishing here is the margin based on my account size. Therefore, it could also happen that with a small account, you would see a margin of more than $2000)

Pros for this trade:
– Based on the signal I get (ADX-Indicator), the price could continues to climb and to stay above the strike so we can get rid of the put option when the time is right
– A very good dividend of 4.4% 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 36

Cons for this trade:
– A pretty low IV Rank (around 26) and IV Percentile which could be better (around 44%)
– The resistance area around the levels of $28 could be too strong and the price could bounce below the strike level
– As trading with options is also a dealing with probabilities, every assumption could turn out as a wrong estimation so at the end the stock would land in the money and you would close the position with a loss (in case you don’t want to keep the stock)

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Result of this trade:  The idea didn’t work out and the stock’s price decreased so you would have got assigned the stock if you would have held it till the end. But in return, you would get a really good dividend holding the stock!
Realized profit for 1 option: between $155 and $170 (full premium as the stock landed in the money)
Days in the trade: 70 (of total 70 days)

Summary: I must admin, this year is not a good year to trade options. At least, from that point of view that it’s pretty hard not to get the stock assigned. That’s why it’s important to open trades on dividend payers or at least on promising growth stocks.

What’s next: As for my part, I’ll keep the stock and see what will happen. In case the price will decrease further it would be a good opportunity to buy more of UNM and thus reduce the original price of $27.50. This will help to get rid of the stock sooner. I’ll keep you updated, folks.

Update 7th January 2022: Today the stock’s price had hit the former strike level so I could sell it even with a small profit. So in total, you could get rid of this stock in just 3 weeks after getting it assigned.

Would you like to learn how to trade options in a serious way without false promises and beyond the gambling ambitions of the masses? Then enroll in an online course on Udemy*. Also check my course I created to show you how to profit from crashes in the stock markets with reversal signals*

 


*Affiliate link: when you click on this link, no additional costs would arise for you and the product or the service will not become more expensive. When you decide to buy the product or use the service, I’ll get a little benefit from the provider which I would reinvest to keep this blog alive.

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