Playmate (Trade) of the Year

When I was driving back from Naples last weekend I listened to Matthew McConaughey’s book “Greenlights.”


Matt tells the complete story himself — as only he can. He acts out everyone’s part in different accents and it is hilarious.


It’s more than just alright, alright, alright — and I highly recommend it in audio …


Anyway, green lights are exactly what I see for Playboy (Ticker: PLBY). This week it traded above $55 before closing yesterday at $52.13 …


Check out the ride so far …



Now the trade I’m in is interesting and it capitalizes on a steep vol skew that really juices the returns …


I utilized the diagonal option strategy to create a synthetic covered call… You see, selling covered calls allows you to earn power income as you hold a quality stock in exchange for being obligated to sell it at a price you consider to be over valued…


This will cap your upside, but will generate high income in the meantime… You can replicate the covered call by owning a long-term call while selling short-term calls, which is accomplished through the diagonal option strategy… 


I purchased PLBY 40 strike long call position out to Dec 2022 and then sold the 55 strike call expiring May 21, 2021 …


Here are the prices where I initially executed the trade …



The kicker for the trade is the volatility skew. I am able to sell the short call at a 50% higher vol than what I am long.


See the skew graph below …


My long 40 strike call to next December is highlighted at the bottom and my short 55 strike call to May 21 is highlighted at the top…



Here is where the trade is right now with the vols circled in the red … 

If I were to take the trade off today I would be up about 29%. However, if the short call expires worthless I make 69%.


Why? Because the higher volatility on the short strikes allows me to capture so much more income on the trade … 


If I can repeat this for five months I would own the Dec-2022 call for free …


The 30-day implied vol illustrated by the red line at the bottom of the graph is hanging tough, but I would expect it to come off as PLBY goes into consolidation around this $50 – $55 range … 


Bring It Home


PLBY has so much potential.


They now have a forward-looking merchandising strategy, plus their partnership with Nifty Gateway to capitalize on their 70-year art legacy is a massive wildcard in the NFT space that could take their revenues to a whole other level.


Institutional money flow has added real juice and it is shaping up to be an 8-bagger, 10-bagger — or more.


Do you own PLBY? As Matthew McConaughey once said, it’d be a whole lot cooler if you did.


Live and Trade With Passion My Friends,


Griff

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