Today’s trade idea for option traders: Workhorse Group Inc. (trade closed)
(Last Updated On: 4. February 2021)
With the hype for regenerative energies and electric vehicles, Workhorse was one of the profiteers of the rally in this sector. In December 2020, the stock plunged about 22%. The reason for this was that the U.S. Postal Service announced it’s delaying a decision on who will get a contract to build next-generation trucks worth $6 billion for its fleet. On 4th January, on the other hand, Workhorse announced that it had received an order for 6,320 C-Series electric delivery vehicles from Pride Group Enterprises, a Canadian and U.S. based company with businesses in transportation for the last mile. So in a short term perspective, there is an opportunity for an options trade. Let’s check this out, folks.
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: 26th February 2021 (45 days)
Strike: $20.50
Premium for 1 option: between $162 and $214 on the day this article was published
Margin: apprx. $520 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 will be pushed above the strike in the next 45 days
– As a profiteer from the US election and increasing demand for electric vehicles, a higher probability that the price of this stock would remain above the strike until expiration
– In spite of low IV Rank of just 9% astonishing good premium which makes it possible to choose a relatively low strike
– A pretty high short float of over 30% which could lead to an explosive surge and grill the short sellers in a short squeeze (Source: finviz.com)
Cons for this trade:
– Low IV Rank of 9% and low IV Percentile of about 9% (Source: Trader Work Station)
– Relative wide bid/ask spread which would make it more difficult to close the trade for a decent price in case one don’t want to get the stock assigned
– As a grower and a start up, Workhorse does not pay any dividends. If the option would land in the money, you’ll need to keep the stock and wait for prices of at least $20.50 in case you want to get out of the trade without a loss. In worst case you’ll need to wait months or even years. That’s why the bull put spread might be a better solution for some traders
– In general a riskier trade as Workhorse is still a start up
Result of this trade: You could close the position on 4th February 2021 for about $30
Realized profit for 1 option: $170
Days in the trade: 23 (of maximum 45 days)
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(Last Updated On: 4. February 2021) With the hype for regenerative energies and electric vehicles, Workhorse was one of the profiteers of the rally in this sector. In December 2020, the stock plunged about 22%. The reason for this was that the U.S. Postal Service announced it’s delaying a decision on who will get a contract to build next-generation trucks worth $6 billion for its fleet. On 4th January, on the other hand, Workhorse announced that it had received an order for 6,320 C-Series electric delivery vehicles from Pride Group Enterprises, a Canadian and U.S. based company with businesses in transportation for the last mile. So in a short term perspective, there is an opportunity for an options trade. Let’s check this out, folks. 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: 26th February 2021 (45 days) Strike: $20.50 Premium for 1 option: between $162 and $214 on the day this article was published Margin: apprx. $520 on the day this article was published Pros for this trade: – A long signal (I’m using the ADX-Indicator), giving a higher probability…