The Submarine Basket – a look at a new position in Citrix

The Submarine Basket contains stocks that are in a pullback and I determine there is a good floor for price to enter. Because traders are often wrong – and that includes me – I utilize Options to help provide a cushion to work with.

A recent add to the basket is a long entry in $CTXS. Here is my current journal entry:

CTXS

Here is a breakdown:

  • I am long stock at $59.80 (1/3 position size)
  • I am short the November 60 Straddle (1/3 position size each)
  • I have a $2 Options Net (the cushion)

Here are a few scenarios that outline what the next step is based on what price does:

1) The stock goes nowhere until Friday expiration. The Straddle will be very cheap to buy back. I will then resell the same (or a Strangle) for the next expiration – to increase the cushion (would more than double)

2) The stock is $61 near the close on Friday. I would sell Calls for the next expiration to buy back the short November 60 Calls. This will be done for a credit (unless I move up a strike)

3) The stock is $58 near the close on Friday. I would sell the same strike Straddle for the next expiration & use the proceeds to buy back the short November 60 Puts. This Options Net would still increase some but the stock piece is now at a loss

4) The stock is $58 near the close on Friday. I would sell the same strike Straddle (or more likely a Strangle) for the next expiration. I would let the stock get Put to me at $60 (1/3 size) bringing my long stock position size to 2/3. This Options Net would increase some but the stock piece is now at a loss

 

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