[Options Premium] Laughing on the way to the bank?
Here's an update on a chart in Hawaiian Holding $HA which was originally shared during this month's All Star Charts Monthly Conference Call:
My personal low conviction comes from the fact that $HA has been in a bit of a downtrend since 2017 when you widen out the lens. But the smart guys at ASC have some technical reasons why a bounce higher may be soon in the offing. Ok, I'll bite.
Volatility is relatively high in this name, and I'm not incredibly bullish. So I'd like to put myself in a trade that can win more ways than just getting the direction right.
Here's the Play:
I'm selling $HA November 25 Puts for $1.15 or higher. These are naked short puts and will require margin (approximately $500/contract) to hold. This means that if $HA were to crater lower below $25.00 per share, there's a risk I'll be assigned on my short puts and I'll become a holder of long stock with a purchase price of $25.
My line in the sand is $25.50. If $HA closes below that level, then I'll just close the short puts and move on with my life, taking any loss that may come with it (though I still might make a profit depending on WHEN the break happens).
The goal in this trade is to buy back the short put for half of what I collected at initiation. So if I collected $1.15, then I'm buying it back for 55cents or cheaper when I get the opportunity. I'm not holding on for anything else. Not worth the risk, especially when holding naked options with theoretically unlimited risk. The nice thing is, even if $HA does not go up from here, as long as it doesn't go down too far, I can still hit my profit target. I like that.
If you have any questions, email me here.