[Options] Getting Back In
A couple weeks back on July 23, we put out a trade idea for premium subscribers in Asana $ASAN. Unfortunately for us, we quickly got whipsawed out, following a nasty red candle day on July 27th. Rules are rules and risk management is Rule #1. The stock was below our level and it was time to get out and limit any further losses.
We did that.
Fast forward a little more than a week later and the stock has recovered quite nicely. Turns out that nasty red candle day was (so far) a one-day event. Having kept tabs on the situation safely from the sidelines, it's become clear to us that our bullish thesis in $ASAN is still intact.
As such, we're going to re-enter our old position here. This isn't something we do often. But in this situation, it feels warranted.
It turns out, that we can still get in at or around the same entry price that we did back on the 23rd, so I'm going to republish the same plan. If you'd like to read the original blog post to understand our rationale behind the original trade, I've unlocked it here so everyone can see it.
Here's the meat of play which we're making:
I like an $ASAN November 75/100 Bull Call Spread for an approximately $5.80 debit. This means I’ll be long the 75 calls and short an equal amount of 100 calls and the debit I paid is the most I can possibly lose in this trade.
The nice thing is, we don’t have too far for this stock to move to signal to us that we’re wrong. So it if reverses quickly on us, I expect any damage will be somewhat limited. If we see $ASAN close below $69 per share at any time during our hold, that will be our signal to cut the trade and limit our loss.
On the profitable side, I’ll be looking to close this spread for a $15.50 credit. This would represent a more than doubling of our invested capital and a capture of slightly more than 50% of the maximum potential profit if held all the way to expiration.
If you have any questions on this trade, please send them here.