BY MARK SEBASTIAN
March 5, 2024
Hey Traders,
While the headline is NVDA is soaring and SMCI is joining the S&P 500…or Bitcooin is exploding…
Underneath these headlines there is the cratering or AAPL and GOOGL.
And it’s not just those names….take a look at NKE:
It’s approaching a 1 year low.
Other names look similar.
So what do you do…sell puts?
NO!
Option prices are currently too cheap market wide.
Take a look at realized vol vs implied in the SPX
10 day and 20 day trading at or above implied is pretty much occurring across almost all markets.
Essentially the long premium is outperforming.
So what is the answer?
Let’s take a look at GOOGL
Again movement is eclipsing implied and implied itself is relatively low.
Personally I am back spreading…
I might buy 10 of the May 130 puts and then hedge it with 400 shares of stock.
The upside, this play has worked great…the downside? Its a lot of margin.
But fear not, there is a trade for a small account…the strangle.
For a name like GOOGL, if I am trading to find a bottom I would execute a delta neutral strangle.
I move in a little closer buying April options….
Despite GOOGL dropping more than 4 dollars on Monday, I can buy the April 130 puts for only 3.90. I then pair those with buying the April 135 call for 3.50.
At onset here is what the P&L chart looks like.
With decent management this trade can make money on both sides…or if googl goes on a real run up or down Ill be able to cash in the running side for bank.
Your Only Option,
Mark Sebastian
Mark Sebastian
Founder & CEO, Option Pit
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CAPITOL GAINS: SMR Aug16 7 call closed for a 150% gain
DELTA STRIKE: VLY Mar15 8 puts closed for a 88% gain
PFE May17 26 calls closed for a 66% win
OP MENTORING: SPY Mar22/19 510 put calendars and 520 calls for 6.4% gain
OPTION SHOPPER: ERX Mar28 65 calls closed for a 90% gain