[Options] A Teachable Moment in $BYND

Sean McLaughlin
January 21, 2020

Wow.

What a run we're having in our Long May 100-strike calls in $BYND purchased on December 20th for $4.00 when the stock was trading below $77/share.

I wish I could say this was a regular occurrence, but of course we know this isn't true. However, this I know with absolute certainty: stepping up to the plate and taking our swings in trades with proper reward-to-risk setups, appropriate position size, and a plan for risk management again and again allows us to "get lucky" every once in a while. And sometimes it only takes one or two trades to make your month or your year. This $BYND trade certainly has a solid chance to become one of those year-makers.

Back to luck, there's a big difference between true "luck" like winning the lottery, and manufacturing your own luck through Best Practices. Which luck would you rather have?

I've been contacted a bunch by people who followed us into this trade and the general feeling I get from people is that they are scared -- scared of letting these enormous open profits get taken away by the evil Mr. Market.

Even if you acted like we did, selling half of our position when we had a double in our call options (at $8.00 a contract, LOL in hindsight) and now you're "free-riding" on your remaining half position -- it can definitely be troubling to think about all the profit going away.

My friend Peter Brandt has repeatedly said, in his 40-year trading career the hardest holds are always the biggest winners. Sounds counterintuitive, but if you're in this trade with us right now, then you know exactly what he means.

So the question I'm getting a lot is some variation of: "Should I take my profits now?"

Here's what I'm doing: I'm holding these calls for now. I'm sticking to the plan of holding these remaining calls into our May expiration.

However, if $BYND trades up through $150/share (an approximately doubling of the share price since December 20th when we entered our position) I will consider taking some open risk off the table and here's how:

I will roll my long May 100 calls to May 150 calls for a credit. Meaning, I will simultaneously sell the May 100 calls and purchase the May 150 calls. This will be a fairly sizable credit and the amount I collect will represent locked in profits that cannot be taken away from me. But, the beauty is I'll still be able to participate on further upside. And once $BYND gets through 150, there's no reason it can't make another run at new All Time Highs above $240 a share. That would be truly astounding.

Congrats to those of you who stepped up to the plate. But let's hold our celebration until May. Let's not be the head coach that gets the gatorade shower that proves to be too early before the heroic last seconds comeback (see: LSU Coach O in 2018).

The fact that Ed Orgeron already got a Gatorade bath in this game is hilarious. pic.twitter.com/czLwdHqCSq

— Sawyer Radler (@SawyerRadler) November 25, 2018

(Congrats Coach O for winning the 2020 College Football National Championship!)

Like I said above, these trades come along rarely, but are you positioning yourself consistently to take smart swings? If not, consider joining All Star Options risk free!

~ @chicagosean

 

 

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