03-18-2020, 07:03 AM
(03-17-2020, 09:33 AM)john Wrote: T currently trading @ ~$33
Selling April 17 T put @40 strike are $7.50
Selling Jun 19 T put @40 strike are $8.00
T hasn't traded above $40 in three years the 20 year chart only shows it above $40 a few times.
This would be "chasing premiums scenario"
However if you got assigned it would mean the market vastly improved?
Please critique my theory
edit to add I own T already mostly purchased around $33
You will be assigned the stock at the $$ of your put $40 if it's 39.99 or less at expiration, so no the market doesn't have to "vastly improve" T could be $30 at expiration.
The DITM puts have less Implied Volatility than the OTM puts. So you're receiving LESS premium relationally than you could if you sold the OTM put, and since it's ITM you'll get less decay available to make a profit before expiration.
Sell the July 28 Put for $2.00 and if assigned, your cost is $26.00. Stcok closes at $34, I keep $2
Sell the July 40 put for $8.00 and if stock goes to $28, your cost is $32.00. Stock closes ate 34, you keep $2
I don't like the DITM put idea but it's your trade.