A trade idea in Sodastream

Here is a trade idea for $SODA if you believe that the short-term weakness subsides soon:

  • BtO November 8 weekly 52.50 Puts
  • StO November 52.50 Puts
  • This can be done for a $.60 credit and protects you on any new flush down through next Friday
  • This trade takes margin

Here are a few scenarios showing how this trade can potentially play out:

1) Stock goes sideways until next Friday expiration for the long 52.5 Puts. You could choose to do nothing then, leave the short monthly 52.5 Puts for expiration the following week. You could also decide to adjust to November 22 weekly expiration – if you wanted more room and/or it showed a bit more weakness

2) Stock begins to recover. You would get nothing for the long 52.5 Puts next Friday. The short monthly 52.5 Puts would OTM so that is a positive. The initial credit is the profit on the trade at monthly expiration – and price is still above $52.5

3) Stock continues down to $50 level by next Friday. You would sell the long weekly 52.5 Puts for a nice gain. The next step would be to deal with the short monthly 52.5 Puts. Possible steps:

a. Adjust down to November monthly $50 strike Puts (this will be for a debit). You would still be positive on the Options Net however

b. Adjust to November 22 weekly $50 or 52.5 Puts (this will be for a credit). This would increase the Options Net

 

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