2020 Client Trade Ideas

Trade 1 Cory C.

Purpose is to find the best performing idea through Q2 of 2020

VXX had a great year for shorts starting near 50 and ending near 15 (as of 12/24).

The idea is to assume more of the same in the first half of 2020 by purchasing an ATM put (15 strike) in VXX in July for 3.45

Management:

Position size should remain small such that if we have a volpocalypse, a total loss doesn’t damage the portfolio

If there is continued erosion in the name, roll down to harvest profits (target 80% capture, so get $4 for rolling down from, 15 to 10, for example). 

Note that if the contest didn’t end Q2, one could roll this position to the new ATM strike within 1-2 months of expiry.

Trade 2 Harald L

BA / December 30, 2019

My trade of next year assumes that the Boing stock will break out of its trading range. The stock has been range-bound the last two years, however a catalyst to force it out of its range to the up-or downside might materialize over the next two quarters. The trade assumption is that it will take longer to get the plane in question up in the air partly to the fact that the plane itself appears to have design issues that go beyond a software patch. Plain software patches, you would think, would otherwise already been implemented. If the stock breaks below its recent range, the volume profile indicates a minor, temporary support at $250 which will be the target for the trade.

The selected option trade (directional trade) is a put ratio spread selling one June (2020) 300 put and buying two June (2020) 295 puts.

The debit for the trade is around $1,250, with a target of 100% return on investment. The performance of the trade will suffer when better progress is made on returning the plane back to the sky but, until then the chart might just follow gravity. I exit the trade when the premium of the ratio spread is at 50% of the purchase prize. The following images show the options selected and a P/L graph. Maximum loss occurs with the stock at $295 at expiration, however I will exit before then.

Trade 3:  David V

I have two ideas but settles on SPX 20Mar am put flys.  But the 3200/3100/3000 puts 121 for $9.00.

After a 24% gain in 2019, I feel the market has discounted all positive outcomes for trade, election and geo political outcomes.  This trade is a longer term than I normally put so I will probably use it against call time spreads if volatility comes in or vxx puts.

There is no real vol edge in the fly just looking for a 3120-3200 range trade.

Trade:

Buy 1 SPX 20Mar am 3200 put

Sell 2 SPX 20Mar am 3100 put

Buy 1 SPX 20Mar am 3000 put

$9.00 per fly

Management:

Close position for 50% loss.  Once trade goes positive trail stop @10

Trade 4: Tim B

2020 Idea : GE. 2020 idea … GE.

GE has had a good year in 2019, but could be poised for another in 2020 assuming it continues to fix its internal problems and is able to capitalize on any positive movement in China trade, rebound in aviation/defense spending in the US, as well as bottoming of the power market and stabilization of its capital structure.

The relative IV of the name is low and options are consequently inexpensive. The idea is to find a CR entry with leverage to the upside and manageable downside.

Based on those criteria, I’d suggest selling the Jun 21 11.×10 put 1×2 and buying Jun 21 15 calls …. This fills for a net .01 or .02 CR and has a break-even at 9.10, with a profit peak at 10 on a fade as well as material upside above 14.

Potential follow-on trades would be selling upside calls against the upside on a further rally; the call could also be rolled up and out if proven successful. To the downside, I think it unlikely that the name falls below $9 but an early close of the extra put at 10 could finance adding downside put purchases.

Trade 5  Cat M.

  1. Pan American Silver (PAAS)
  2. I think we’re headed toward stagflation.  If I’m correct, the names that will benefit are things that will hurt if you drop them on your foot, they hurt.  IMHO, the best candidates in a period of stagflation are gold and silver.  At this point in time, silver is undervalued relative to gold.  In the silver space, PAAS still has a small exposure to gold, but its main product is silver – from mining.  I expect the exposure to gold (via a gold mine) to be sold and closed in the 1st quarter 2020.  That will free up some capital that PAAS can then either use for general corporate purposes or redeploy into more silver mining projects. 
  3. PAAS has good liquidity in its options, so I can get out of the trade if the spirit moves me.  While the spread isn’t as tight as I might otherwise like, if I middle the market, I don’t have a problem with it. I like to have a lot of time for my trade to play out.  For that reason, I’ll buy the Jan15 2021 22 strike call.  And – I don’t have to tie up as much cash.  That call in particular because I like having calls that are out a ways to expiration and I prefer having the call kind of in the month, but not super deep in the money.  The one I selected makes me happy.
  4. Buy the Jan15 2021 22 strike call.
  5. Price target:  $20
  6. If I’m down 20% on the trade at the beginning, I’ll just close it.  If the price moves down 20% from a higher position, I’ll close it.
  7. I’ll incorporate by reference as though more fully set out at this point the chart(s) I sent over before.

Trade 6:  Lu M.

McDonalds – MCD

The stock was beaten down after earnings in October and the CEO resigned.  It appears to be trading at the bottom end of its channel and it looks to trace the 50-day MA.  MCD has a history of stock buybacks and the new CEO also picked up shares.  It has earnings coming up towards the end of Jan.

It is currently trading at 197.25 and it’s traded as low as 187 and as high as 219 in the past few months.

I’m expecting it to continue to follow its trend up from its recent lows.

IV looks relatively cheaper in Mar compared to surrounding months (Feb – 17.57, Mar – 17.04, Jun – 18.2).  The straddle price is approximately 12.5.

Buying 5x call spread Mar 200 / 210 for 3.25 and 1x put Mar 195 (in case the stock drops post-earnings).

If the stock moves lower after earnings close everything out, if the stock moves up hold for several days or when it reaches 206.  If it looks like it may settle towards 210 post earnings turn it into a 200/210/220 fly.

Trade 7 Rafal K

  1. Stock Name and Symbol:
    EQT : EQT Corporation
  • 100-500 words on why you like the stock
    The stock is bottoming (natural gas was worst performing in 2020, but the demand is increasing). Active call buying in the stock.
  • An ‘option centric reason’ for the specific option trade you selected
    Pricing off of ATR options are cheap:

IV went off of its highs as well, and is cheap comparing to 2-3 weeks stock movement

  • and 5. The Option Trade and screen shot

Buy +1 EQT 100 15 JAN 21 15 CALL @1.55 NYSE

Hedge with stock:

SELL -10 EQT @10.954 LMT

  • Price Target

If EQT goes back below 7 close and re-evaluate, if EQT goes to 20 close for profit

  • Risk plan

Do not lose more than 50% on this trade. May do some gamma scalping along the way (if more than 1 contract purchased)

Trade 8 Dave P

OptionPit Year End 2019 Contest  1st Quarter 2020 Options Trade for Dave P  AMZN 2050‐2150‐2250 call butterfly March 2020 

 For 1Q2020 I like AMZN long to trade up to $2250 by March 20, 2020. The overall market remains strong.  Consumer discretionary sector is gaining relative strength.  Amazon  itself just  burst  higher  after  a  four  month  sideways consolidation. 

Despite the strong market overall, AMZN has not broken above its ATH of 2050 made in August 2018. In July 2019 it tested those levels, reaching 2035, before falling back and stag-nating for most of 2019.  Flat ceiling and higher lows looks like higher prices to come. I like AMZN to approach $2050 again and pop above in 2020.   Current price for AMZN is $1847, and the March monthly straddle is +/ -180,  so a 1SD move would be  $2030 by March 2020 expiry. With consolidation at the 

$2050 level, I believe AMZN can pop by more than 1SD by  March expiry, with room to $2250 sometime in year 2020.   IV30 and HV10 are both elevated versus HV90 due to the recent jump in AMZN on Christmas news, so there should be premium to sell in March 2020 calls. 

The trade: AMZN 2050‐2150‐2250 call butterfly @ $6.50 

Delta: 4.36  Gamma: 0.01  Theta: ‐3.60  Vega 22.52 

Paying $6.50 for $100.00 wide fly with small negative theta into January     Alternatively, do 5x flies and hedge with $1500 strike March put  Delta: 16.85  Gamma: 0.10  Theta: ‐33.32  Vega 202.43

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