Options Trade #37 - Cash Secured Put on ATVI - Wheel of Fun


VTS Community,


As you may have noticed, I often times circle back to the same tickers for my trades several times over again.  I think it's a good idea for everyone to have a short list of stocks they get to know well.  So when those stocks hit levels that are too low or too high, trades can be taken. 


My suggestion to you is develop a list of 5 of your favourite stocks that you think have good long term value. Also, make a list of 5 stocks that you hate, that you think are terrible long term value. Put them on a watch list, follow their progress, pay attention to their earnings dates and company announcements. That way, when your favourites are beaten down in price, or the ones you hate are touching very high valuations, you'll know what to do. Start with 5, and over time you'll add to it. Eventually you'll have a nice watchlist of stocks to choose from, so that the trades you are taking are based on a good understanding of the underlying stock.



Today I'll circle back to one we've already traded before for a new "Wheel of Fun" trade. Activision Blizzard (ATVI). Its price is nearing recent lows, so it's a good candidate for a Wheel trade.


1 year chart of ATVI:

The Trade)


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



Sell to Open 1 x 18 April 19' ATVI 40.00 Put Credit:  ~ 1.30 Days to expiry:  49

* 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 @ 40.00  =  4,000 -  This trade requires 4,000 per contract

-  The VTS Discretionary model portfolio is reset at 25,000.00 -  4,000 is 16.00% 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 -  4,000 per contract is what the trade is valued at -  4,000 * 10%  =  400

* If I'm down more than 400$ per contract I will close it



Please check out the strategy video for the Wheel of Fun, and feel free to ask any follow up questions: Volatilitytradingstrategies@hotmail.com




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