July 6, 2020  Terry’s Tips Trade Alert  – Earnings  Eagle  Portfolio

 

We have given serious consideration to switching from TGT as the underlying because of the big discrepancy in IV of our long 21Aug20 options (about 30) and that of our short 10Jul20 options (about 15).  The big reason for this difference is that the 21Aug20 series expires just after the 19Aug20 earnings announcement.  A year ago, they reported on August 22, and we had assumed that the 21Aug20 series would expire before the announcement.

 

A closer check at the alternative underlying we were considering (AZN) caused us some concern because many of the options appeared to be illiquid, and while this might be acceptable to an individual investor, it would surely cause problems with multiple orders going in through Auto-Trade.

 

Our solution is to replace the 21Aug20 long options with the 14Aug20 series.  On or about Aug 14, we will be selling the juiced-up 21Aug20 series, and then selling it again when we use the cash that we collect to buy new calendars and diagonals.

 

BTO 11 TGT 14Aug20 120 calls (TGT200814C120)

STC 11 TGT 21Aug20 120 calls (TGT200821C120) for a credit of $1.20 (selling a calendar)

 

BTO 4 TGT 14Aug20 120 puts (TGT200814P120)

STC 4 TGT 21Aug20 120 puts (TGT200821P120) for a credit of $1.83 (selling a calendar)

 

BTO 2 TGT 14Aug20 120 calls (TGT200814C120)
STC 2 TGT 17Jul20 120 calls (TGT200717C120) for a debit of $2.04  (buying a calendar)  

 

BTC 4 TGT 10Jul20 123 puts (TGT200710P123)

STO 4 TGT 10Jul20 118 puts (TGT200710P118) for a debit of $3.44  (buying a vertical)

 

Be[Ta1]  prepared to change this (these) price limit(s) by $.05 or more in order to get an execution.

 

Happy trading.

 

Terry