In a rush, so using a pic I made for a post about a Chinese stock
Buying The Dip
Weâve got some bad economic news today, and the company weâre betting on had bad news of its own this week.
One strategy thatâs had some success for us in the past, is placing bullish options trades on Portfolio Armorâs top names after a market dip. Thatâs what weâre doing today.
In addition to being one of our top ten names last night, todayâs stock currently has a valuation rating of 9 according to Chartmillâoffhand, Iâm not sure if Iâve seen that before, but itâs certainly rare. Our top names tend not to be cheap.
Weâve got two trades on this one today:
A short term, speculative trade expiring at the end of next week. The maximum upside on this one is uncapped, and the maximum loss is 100%.
A medium term trade expiring after its next earnings report in April. The max upside on this one is about 220%, and the max loss is 100%.
Details below.
Todayâs Short Term, Speculative Trade
The stock is Delta Air Lines (DAL 0.00%â), the company whose lady pilot landed a plane upside down in Toronto this week, and our short term, speculative trade is buying the $61 strike calls expiring on February 28th for $1.70. The max gain on 2 contracts is uncapped, the max loss is $340, and the break even is with DAL at $61.70. This trade filled at $1.70, but you may be able to get it for less now.
Todayâs Medium Term Trade
Delta again, and our trade is a vertical spread expiring on April 17th, buying the $65 strike calls and selling the $67.50 strike calls, for a net debit of $0.77. The max gain on 4 contracts is $692, the max loss is $308, and the break even is with DAL at $65.77. This trade filled at $0.77, but you may be able to get it for less.
Exiting These Trades
For the first one, Iâll set a GTC limit order to exit one contract at $2.40, and try to exit both of them before the end of next week, ideally for more than what I paid for them. For the second trade, Iâll set a GTC limit order to exit at about $2.35, and lower that price, if necessary, as we approach expiration.
Out of our February 28th DAL calls at $2.02 today, for a gain of 19%.