If you agree that EA will stay above its 200-day moving average, consider the following trade that relies on the stock remaining above $135 through expiration in five weeks. Buy to Open EA 18Jun21 130 Put (EA210618P130) Sell to Open EA 18Jun21 135 Put (EA210618P135) for a credit of $1.20 (selling a vertical) This credit is $0.06 less than the mid-point of the option spread when EA was trading at $138.62. Unless the stock rallies 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 $118.70. This trade reduces your buying power by $500 and makes your net investment $381.30 ($500 – $118.70). If EA closes above $135 on June 18, both options will expire worthless and your return on the spread would be 31% ($118.70 / $381.30).
As with all investments, you should only make option trades with money that you can truly afford to lose.
Happy trading,
Terry |