WHAT WE DO? WE SELL OPTIONS FOR INCOME. WE USE THAT INCOME TO BUY DIVIDEND GROWTH STOCKS!
CHECK OUR TRADES ON OUR FACEBOOK PAGE OR HERE.


New Trade: SELL MAY4 14 PUTS on GME (weeklys)

This morning I entered another trade against GameStop (GME). It was a bit speculative trade and a source of either a quick profit or a big burn.

Today after market close GME reported 1Q results and I took a risk of being burnt if the company reported disappointing results.

This trade will expire tomorrow, so it was just a one day trade, but the premiums and volatility were very appealing and literally screaming for taking this trade.

Check the options chain:

GameStop premiums

Note those juicy premiums and the volatility way over 100%. And even now those are the most current numbers indicating how nervous investors were about this stock.

The company reported somewhat better than expected results. Apparently, the results were good enough to make the stock rally after hours (by 5% at first, then it slowed down to 3%).

Will it survive? If so and the stock ends above my strike tomorrow, it will be my most profitable trade ever.

Trade detail

STO 1 GME MAY4 14 36.5 put @ 1.09

The trade has a low BP (buying power) or maintenance requirements, expected ROI 3.08%, expected ROM 13.58%, and a safety factor at 1.40%. The trade opened in the morning and if all is good it should expire tomorrow.

That is a whooping 6,436,545.721% annualized return!

Okay, to be fair, it didn’t happen yet and tomorrow everything can be different and I may lose this trade. If the stock starts falling tomorrow, I still am ready to roll it over and away in time to preserve my money.

 

Max Profit $109 When selling puts, the hope is that they will expire worthless, so the max profit is equal to your execution price. Max profit occurs if GME is above $36.50 on expiration day, which is May 23 for this option.
Max Loss $3541 In theory, GME could keep going down all the way to zero, and since you are giving someone else the right to sell it at 36.50, your max loss is very high. However, remember that this trade has a time limit on it. On expiration day, May 23 for this option, if GME is below 36.50 you will either need to buy back (cover) the put, roll it, or you will be assigned -100 shares of GME as a long position, with an entry of 36.50.

 
 

 
 
If the premiums stay elevated tomorrow and it will become obvious that the stock remains above the current strike or will have a strong momentum upwards, I may open another put selling trade against this stock as this is a great opportunity to make money.

Happy Trading!
 
 





2 responses to “New Trade: SELL MAY4 14 PUTS on GME (weeklys)”

  1. Scott says:

    Nice trade! Looks like you got out with a good profit. Did you use margin or sell them cash-secured?

    • Martin says:

      Scott, I used margin and yes, this looks like to be my best trade ever. Bad I didn’t have more free cash to take more contracts, but I am grateful for what i have so far. Thanks for stopping by.

Leave a Reply

Your email address will not be published. Required fields are marked *