Today’s trade idea for option traders: Old Republic International (trade closed)
(Last Updated On: 4. October 2021)
I’ll make it quick this time because it’s actually a continuation of the last trade on Old Republic International folks. As the price was moving sideways and it didn’t look like it was making ambitions do go down, I opened another options trade on ORI. So 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 (in the money)
Alternatively: Bull put spread
Expiration: 16th July (42 days)
Strike: $29
Premium for 1 option: between $295 and $305 on the day this article was published
Margin: apprx. $360 on the day this article was published
Pros for this trade:
– A still valid long signal (I’m using the ADX-Indicator), giving a higher probability that the price would hit the strike in the next 42 days. But it’s still unlikely that the price would hit $29 in such brief time span. Therefore, there are higher chances that the price would approach close to the strike at the end of the expiration of the option. So in this case, we are relying only on the time decay. If the price would cross the strike of $29, so much the better!
– A dividend of 3.34% 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)
Cons for this trade:
– Low IV Rank and IV Percentile
– The long signal could turn out as a flash in the pan
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Result of this trade: Just after a couple of days, I got the stock assigned before it expired. How is it possible? Well, there are two types of options: an American style and European style. When you sell American style options, the rule says it’s possible that the option buyer has the right to exercise the option before expiration.
Realized profit for 1 option: As the stock was assigned I (and maybe you too) could keep the full premium. In this case it would be around $300
Days in the trade: 11 (of total 42)
Summary: For this moment you would get around 3.34% dividend for waiting until the stock hits the former strike level of $29 to sell it without any loss. What you can do in the meantime is to check the Implied Volatility from time to time and if it gets higher, to check if it’s worthwhile to sell covered calls on ORI.
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