Options Profit Engine
4/3/19
This Week’s Trade Recommendation Review:
Note: Trades listed here are from the last week and are listed for review purposes only. Any new trades issued will come as a separate trade alert.
(From April 1st) Sold the Electronic Arts (EA) May 3rd 92.5-96.5 put spread for a $0.74 credit.
Video link for trades over the last week:
https://content.jwplatform.com/videos/52bj3IHu-bK67iJnL.mp4
Trade Analysis:
We can basically cut and paste the analysis from the TTWO trade for the EA trade. EA isn’t quite as attractive an opportunity as TTWO, but it roughly fits the mold. We have a major growth story in video game stocks to Google Stadia and Apple Arcade. We have a fairly reasonable valuation. And, we won’t be holding this trade through earnings.
Like TTWO and ATVI, I believe there’s a floor on the price of EA. I imagine the share price will remain mostly stable until earnings, barring any unexpected news. From a volatility perspective, we have implied and historical volatility trending lower, which is good for selling put spreads.
Once again, I’m holding off doing a hedge with this particular trade. However, I will probably do a separate hedge trade in the SPY later this week just because we have jobs news on Friday which does pose some gap risk. Whatever we decide to do, it won’t cost a lot.
Open Position Update:
| Position | Current Return |
| CAT April 12th 120-124 Put Spread | +15.6% |
| UVXY April 12th 30-33.5 Put Spread | +12.4% |
| TTWO May 3rd 85-89 Put Spread | +8.4% |
| EA May 3rd 92.5-96.5 Put Spread | -4.7% |
Portfolio Commentary:
We have four open positions this week. Results are based on trading prices for April 3rd.
CAT April 12th 120-124 Put Spread – CAT is ready to be closed and we’ll do so this week for basically full value.
UVXY April 12th 30-33.5 Put Spread – UVXY has served as a reasonable hedge and is also doing well from a return perspective. I’m thinking of closing it soon and adding a new similar trade except in VXXB, a long volatility fund which doesn’t have leverage.
TTWO May 3rd 85-89 Put Spread – So far, TTWO has held its ground as we expected. The trade is doing well so far and looks like it could be ready to close within two weeks.
EA May 3rd 92.5-96.5 Put Spread – We just made this trade on Monday, so we’ll wait to talk more about it next week.
Volatility Review:
Volatility and the VIX are trending back down after the brief spike last week. The VIX did move up a bit today, likely in anticipation of the Friday jobs number. If the number is a big surprise (negative) we may see another Friday spike in volatility. Otherwise, I expect volatility to melt again after the report is digested.
Just in case Friday turns into a sell off day because of the jobs number, we’ll be putting on an inexpensive, short-term put butterfly tomorrow morning.
Alright, so SKEW is doing precisely what we expected and heading back up now that the short selloff has resolved. There has been some put hedge buying in the S&P 500 options ahead of the jobs number. However, I expect those hedges to be monetized if we see a stock decline on Friday. It still doesn’t look like we’re in for a sustained volatility period at this point.
Registration Closing
Registration for my free presentation next Tuesday is closing soon. I’ll share “How To Use A Special Indicator To Enhance Your Options Trading Success” – something I’ve not been able to share until now. It’s part of the Wealth365 summit with about 70 other trading experts giving tips, tricks, and training. It’s free but requires registration. Click here.
Come Hang Out with Me in Las Vegas
I’ll also be giving two presentations at the Las Vegas MoneyShow May 13th and 14th. Both are free. I don’t know if they’ll be live steaming or recording them but if so you’ll need to be registered to watch online. Click here for more.
