What to do when your stock, WBA, gets crushed?
What to do when you r stock gets crushed you ask? I will tell you the best that I can. A few weeks ago I wrote about AMZN crushing WBA in the retail wars of the 21st century. To be honest WBA has really suffered since then. I like WBA as a value play and have owned it for a long time. I bought some more at $66 a couple months ago and now I have some issues.
Charts from LIVEVOL
Trading options around a stock position
I have some short term issues and some long term issues. Short term I have no issues because I owned strangles like I wrote in the blog. I booked the put side today and now have, ahem, plenty of upside powder should a miracle happen between now and Jul. The strangles helped on the stock but did not mitigate all the losses so I am down about a bit per share on the ratio I had set up (more strangles than STOCK). Step 1 was to take the money I made and reassess.
Use the stock and junk calls as upside, but make dough on the downside
It is unlikely WBA pops any time soon. It could but I am not counting on it. A trade I like here is a just OTM ratio put spread. I would like a little income on what looks like a dead stock but I want to minimize my risk. Again here I can ratio the trade and buy long term puts at the crushed vol and just use ratio put spreads against that put. The ratio put spreads can be more aggressive if WBA moves down I want them to make money. I put on less ratio spreads than long puts so I am contract long should WBA find a new low. The junk calls and stock help out if the put ratio is too aggressive and WBA moves back up. Then go get a Pina Colada and watch the ride. Maybe the CBD will be big sellers!
Getting out of trouble when in trouble
If this repair idea sounds difficult, we will teach it in our Portfolio Management Master Class in a week or two. When vol gets real low, long strangles can work ok as long as there is some time.
Positions in WBA
Follow Andrew@optionvol
Follow Mark@optionpit