Options Trade #29 - ATVI (Activision Blizzard) Short Put "Wheel of Fun"

Updated: Dec 27, 2018

VTS Community,

I hope everyone had a fantastic Christmas.  I think for most people it's their favourite holiday so great time to relax, get away from the stresses of work, and enjoy time with the family.  Hopefully you enjoyed it to the fullest.

Markets are up a little in the early going, but I think even if this is the start of a recovery, we'll still see some choppy action as the wounds are still fresh from that -20% drawdown.  So it's important to be patient and not rush back into anything until the signals actually support that.

One trade I really like during strong market sell offs is the "Wheel of Fun" strategy of selling cash secured puts on some names that have been beaten down.  Now obviously in this market we don't have to look very far for those as pretty much everything is way below it's high.  So for me it's just a matter of pulling from my short list of stocks I've traded a lot in the past and had success with.

* I'll do one today, and likely another one tomorrow to split them up.

Click here for the Wheel of Fun Strategy video

The Trade)  

"Wheel of Fun" Short Put on ATVI  (Activision Blizzard)

Sell to Open 1 x 18 Jan 19' ATVI 42.00 Put Credit:  ~ 1.65 Days to expiry:  23

* prices move around, so just get the highest premium you can. 

Margin Requirement: -  I always trade these "cash-secured" meaning I reserve the full capital required to own the shares outright if assigned

-  1 option contract  =  100 shares if assigned -  100 shares of ATVI @ 42.00  =  4,200 -  This trade requires 4,200 per contract

-  The VTS Discretionary model portfolio is at 26,365.36 -  4,200 is 15.93% of the portfolio

* You can scale your trade to roughly 15% - 20% of your VTS Discretionary funds

Stop-loss: -  I always use a 10% stop-loss on this type of trade -  4,200 per contract is what the trade is valued at -  4,200 * 10%  =  420

* If I'm down more than 420$ per contract I will close it

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