[Options] Lilting Lillies
Call me crazy, but I think that gap is going to act as a magnet for prices over the next few months.
So we're going to get involved with a defined-risk, bearish bet.
Here's the Play:
I like buying a $LLY April 600/500 Bear Put Spread for approximately $35.00 net debit. This means I'll be long the April 600 puts and short an equal amount of the April 500 puts:
While our risk is defined, our upside is also capped. But that's okay because I'm capping our profit potential right at the level where I think the stock may run into some support.
My trade management here is simple. As long as $LLY stays south of $620 per share, then I'll continue to hold this spread. If it's above $620, I'm out. My bear thesis will have been proven wrong.
If a trade north of $620 doesn't materialize, then I'll be holding for $LLY to trade down to $500. If/when it gets there, that's when I'll close the trade and book the profits -- whatever they may be.
If I'm still in the trade on April 1st (expiration month), then I'll aggressively trail a stop-loss level at a 3-5 day high print for an exit.
If you have any questions on this trade, please send them here.
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