Trade Alert: Top Names

Bullish options bets on two of our system's top ten names from last night, a biotech and an ad tech company.

Tapping Into Our Own Source Of Alpha

As we saw in last night’s Top Names post, on average, Portfolio Armor’s top ten names return 16.46% over the next six months, versus SPY’s average of 9.29%.

That return is often driven by one or two names in the top ten climbing 50% or 100% over the next six months. If we luck out and pick the names likely to do that, and bet on them with options, our returns can be multiples of that. That’s what we’re aiming for here. Both of the stocks we’re betting on from last night’s list have potential catalysts in the back half of the year, and significant short interest that can add fuel if those catalysts turn out to be positive. The first is a biotech, and the second is an ad tech.

Today’s First Top Names Trade

The stock is Intellia Therapeutics (NTLA 0.00%↑), and our trade is a risk-reversal:

• buying the $12.50 strike call expiring on January 16th, for $2.75. This trade filled at $2.70.

• and selling the $10 strike put expiring on January 16th, for $1.40. This trade filled at $1.43.

With risk reversals, our upside is uncapped, and our risk is the premium we pay for the call + the value of 100 shares of the stock at the put strike price - the premium we got for selling the put. It’s roughly similar to the risk of buying the stock, so I feel comfortable using risk-reversals as an alternative to our core strategy of simply buying top names.

Today’s Second Top Names Trade

The stock is Digital Turbine (APPS 0.00%↑), and our trade is another risk reversal:

• buying the $5.50 call expiring on January 16th, for $1.50. This trade filled at $1.45.

• and selling the $5 strike put expiring on January 16th for $1.25. This trade filled at $1.26.

Exiting These Trades

• NTLA: I’m going to open a GTC order to sell the call for $6, and lower that price, if necessary, as we approach expiration. (the put I’ll just hope expires worthless).

• APPS: I’m going to open a GTC order to sell the call for $3.35 , and lower that price, if necessary, as we approach expiration. Looks like this one needs to be priced in 10 cent increments, so I used a GTC order of $3.40. And since I had 2 contracts for this one, I just applied that GTC order to 1 of them.