If you agree that SE’s uptrend will continue, consider the following trade that relies on the stock remaining above $220 through expiration in five weeks. Buy to Open SE 16Apr21 210 Put (SE210416P210) Sell to Open SE 16Apr21 220 Put (SE210416P220) for a credit of $3.90 (selling a vertical) This credit is $0.10 less than the mid-point of the option spread when SE was trading at $235. 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 $388.70. This reduces your buying power by $1,000 and makes your investment $611.30 ($1,000 – $388.70). If SE closes above $220 on April 16, both options will expire worthless, and your return on the spread would be 63% ($388.70 / $611.30), or 611% annualized.
As with all investments, you should only make option trades with money that you can truly afford to lose.
Happy trading,
Terry |