Today’s trade idea for option traders: Sinclair Broadcast Group (trade closed)
(Last Updated On: 3. November 2021)
When I introduced the trade from 12th November 2020, it could be closed 14 days later with a profit of $150 – 155$ per option. Today, there is another opportunity for a new options trade on Sinclair Broadcast Group. As the previous trade lies just a couple of weeks ago and there are no new earnings published, we have the same conditions: In spite of the negative earnings announcement in Q3 2020 (an operating loss of $4.18 B) there nevertheless comes a certain momentum upwards which gives to option traders an opportunity for a new trade on Sinclair Broadcast Group. 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 (out of the money)
Alternatively: Bull put spread
Expiration: 19th March 2020 (79 days). This time we have a longer expiration period than usual because there might be a risk that the year-end rally could stop in January and we could see a sideways phase for a couple of weeks or even a brief period of a stronger correction. To avoid the stock landing in the money, we should give it more time to recover in case of a correction phase.
Premium for 1 option: between $220 and $245 on the day this trade idea was published
Margin: apprx. $540 on the day this article was published
Pro for this trade:
– Good momentum and a long signal (I’m using the ADX-Indicator) giving a higher probability that the price won’t be pushed under the strike in the next 79 days
– The resistance level at apprx. $30 was broken through and the price level didn’t fall back the next days (check the blue line in the screenshot). This increases the probability that the stock’s price could stay above the level of $30
– In case things will go “wrong” and you will get the stock assigned, you’ll get about 2.48% dividend which is not the best one. But at least you would get paid anyway
– Relatively good bid-ask spread
Con for this trade:
– In case the stock gets assigned: sharp losses of $4.18B in Q3 2020 could dispose SBGI to cut the dividend. As long as COVID19 is raging in the United States, the economic situation of Sinclair Broadcast will probably keep tense.
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Result of this trade: You could close the position on 3rd March 2021 for about $15 – $20
Realized profit for 1 option: $205 – $210
Days in the trade: 63 (of maximum 79 days)
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