Good morning!
I'm always happy when I find a cheap hedge...
Note the TSLA play above and the SQQQ addition for the STP - it might not have been finished when you first viewed the post:
- Tesla (TSLA) – They are now at the point where I'd rather short them so let's take the money and run on this one. In fact, someone is willing to pay us $100 for the June $800 calls so let's sell 2 of those for $20,000 and buy 3 Jan $800 ($220)/June 800 ($152) bear put spreads for net $68 ($20,400) so we're in the spread for net $400 if all goes well and, if TSLA is below $800 in June, whatever premium value remains in Jan will be our profit.
- Nasdaq Ultra-Short (SQQQ) – The Nasdaq has been very strong and this is a 3x ultra-short so, even at $13, a 20% drop bumps us 60% to $21 and that would put our $10 calls $11 in the money for $115,500 and the current net is $10,625 so we have $104,875 of downside protection in this position but we can sell 100 June $25 calls for $1 ($10,000) and buy 100 June $13 calls for $2.25 ($22,500) and that will give us another $120,000 worth of protection and, if SQQQ does spike up, we can cash out the long calls quickly because the short calls will be covered by the 2022 $10s. Not bad to add net $107,500 worth of protection for $12,500 – I know I will sleep better over the weekend!
June $13s came in at $2.30 but the $25s are trading at 0.85 and that's not a compromise I'd make - I'd rather sell the $23s (now $1) than pay extra for a spread we hopefully don't need. So my plan is to wait and see if we get the $1 for the $25s and, if not, then look at alternatives - which can include selling longer months, like 40 Jan $30s for $2.60 (still $10,000).
