I have an Earnings trade for $RRGB (reports BMO 8/11) and here are the details:
- Long the August 90/95/100 1×2 Split Call Ratio
- Short the August $75 Puts
- Cost: tiny credit
- Takes margin
My Risk starts at $100 on the topside and $75 below. Quite a range to work with. This trade has a sweet spot of $95 at expiry.
EPS graph courtesy of Estimize (I added the Red lines)
– DM 11:10 PM CST
AMC 5/18 & BMO 5/19
Here are a few relevant charts:
– DM 9:45 AM CST
Now that August Option expiration is behind us, my Basket of Earnings trades has thinned out to just 3 positions: $BITA $JCP $RRGB
Here is the Summary:
I receive questions each week regarding Option Collars – questions like when to do them, why I have one on a certain position but not others, why do this at all, etc – so I thought I would pick one of my existing positions to show how a Collar can help to protect gains.
I am currently long $RRGB (since 8/19) at $62.50 and have a December 80 Collar. Let’s see a Daily chart:
As you can see it has really pulled back to near the last breakout level (a breakout back-test).
Now let’s break down how the Collar is doing:
- I have had several Option pieces since putting on the original stock trade
- latest: The December 80 Calls were sold on 11/05
- latest: I added the 80 Puts on 11/11 to complete the Collar
- The Options Net is currently -$.17 cents
- The short 80 Calls are OTM (out of the money) now. This means that the value I got for selling them has decreased, so it is cheaper to buy them back ($.40 currently). This piece is winning
- The long 80 Puts are ITM (in the money) now (currently $4.70). This is the key piece to having a Collar: the long Puts are offsetting the drop in the underlying stock. This piece is winning