Subject: A Me(h)T Trade

Dear Friend,

Today we bring you a brand new Trade of the Week! Each week we share a new trade idea directly from our trading team.

Terry

November 10, 2021

Week 671

A Me(h)T Trade

MetLife (MET) won’t get anyone’s juices flowing. It’s frankly a rather boring insurance and financial services company that’s been around for 158 years. But who cares … if we can make money on a trade, right?

MET reported earnings last week that beat estimates on the top and bottom lines. Hardly anyone noticed. Analysts were silent. There were no stories other than a dry listing of its key performance numbers. And the stock fell 2% the next day. Ho hum.

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But MET is up 36% for the year, which is well ahead of the S&P 500’s 25%. After a swoon in June and July, the stock has been grinding steadily higher along the dual support of its 50-day and 200-day moving averages. The key is the 50-day (blue line in chart), which has allowed just three daily closes below it during the past three months. This trendline, which is rising slightly, sits at $61.10, which is above the short strike of our put spread trade. Thus, MET would have to pierce this support to hurt this trade. And the 200-day (red line in chart) sits at $61 to provide another layer of support. The last time MET closed below the 200-day was more than a year ago.

If you agree that MET will continue its slow ascent and stay atop its 50-day moving average line in chart), consider the following trade that relies on the stock remaining above $62.50 (through expiration in six weeks.

Buy to Open MET 17Dec 60 put (MET211217P60)
Sell to Open MET 17Dec 62.5 put (MET211217P62.5) for a credit of $0.75 (selling a vertical)

This credit is $0.04 less than the mid-point of the option spread when MET was trading at $64. Unless the stock rises quickly from here, you should be able to get close to this amount.

Your commission on this trade will be only $1.30 per spread. Each spread would then yield $73.70. This trade reduces your buying power by $250 and makes your net investment $176.30 ($250 – $73.70) for one spread. If MET closes above $62.50 on December 17, both options will expire worthless and your return on the spread would be 42% ($73.70/$176.30).

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Any questions? Email Colin@terrystips.com

Did you know that the actual 10K Strategy portfolios conducted at Terry's Tips averaged gains of over 100% in 2017, 2019, and 2020? The 10K Strategy consists of calendar and diagonal spreads which benefit from the faster decay rates of the short-term puts and calls which are sold (using longer-term options as collateral). You can learn all the details on how to carry out this strategy on your own by subscribing here. Use the Special Code D21M to pay only $98 per month vs. our regular fee of $197 (cancellable any time). Why wait any longer to make this important investment in yourself?

I look forward to having you on board, and to prospering with you.

Terry

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Subject: A Me(h)T Trade

A Me(h)T Trade