NBA basketball is finishing up its season with a thrilling Finals between the Heat & the Spurs. So with that in mind, I thought I would come up with a basketball analogy to show how taking that one extra step can make a real difference between success and failure.
In my current $LULU post-earnings trade, I took that one extra step (made that one extra pass) to ensure that my trade had some protection (have much improved probability of success):
- I am Short the June 67.5 Put (I picked this level due to it being the lowest Put strike with significant OI)
- I am Long the June 70/72.5 Call Spread
- This trade cost me a nickel
I typically look for areas where I feel traders are putting stakes in the ground, but sometimes I am simply too early. With this trade I saw some continued weakness so I decided to add a Long June 14 weekly 67.5 Put at a $.50 debit (protects the Short June monthly Put). So far this protection has been key as price is currently hovering near the $66 level.
OI = Open Interest