Good morning!
/NG flying again this morning.
WBA/Rookie - That LTP position started out with 40 2022 $40s and 10 short 2022 $55s and 20 short 2022 $45 puts on 3/2 and then we rolled down to 50 of the 2022 $30 calls and covered with 30 of the $52.50 calls. We bought back the short calls for a $5,350 profit and lost $6,800 on the rolled longs and made $2,400 (so far) on the short puts so the position is, overall, about even in the LTP. I think $40 is ridiculously low for WBA and the portfolio is up 100% so we can afford to gamble but, if you can't, then by all means at least partly cover your longs.
$42 is $36Bn for WBA and I am, frankly, bored with reiterating my very simple premise that this stock is ridiculously undervalued so, hopefully, a picture is worth 1,000 words, because I am out of them at this point:
In Q1, which ended 2/29, they made $952M and in Q2, at the heart of the closings, they lost $1.7Bn and, even if they lose another $1.7Bn (doubtful) they can make it all up in 3 normal quarters going forward.
As a more conservative play, from scratch, I would go with the following:
- Sell 10 WBA 2022 $35 puts for $4.25 ($4,250)
- Buy 15 WBA 2022 $35 calls for $8.50 ($12,750)
- Sell 15 WBA 2022 $50 calls for $2.65 ($3,975)
That's net $4,525 on the $22,500 spread that's $9,000 in the money to start. The upside potential is $17,975 (397%) if WBA can get back to 50 over the next 18 months, which seems very reasonable to me.
Fire/Snow - Stay safe.
