Hi Advanced Traders!
Let's set up some more bear call spreads to collect premium.
Bear Call Spread
With AMD and SPY's bullish weekly candlestick, there may be a chance that the markets may want to start rallying back up. However, I also still see some market uncertainty in light of the Russia-Ukraine tensions and our upcoming rate hike in March.
If you have some spreads set up on AMD from weeks before with around an 80% profit, you can consider closing them. If you want to wait and see how markets progress in the next couple of days, feel free to pause from starting any new spreads. If your bias is still bearish to neutral, you can consider starting new spreads with further expiration dates.
Expiration Date: March 25, 2022
Step 1: Buy 1 $155 call option (delta 0.04) for $31.
Step 2: Sell 1 $136 call option (delta 0.21) for $179
Step 3: Set up a buy-stop order of 100 shares for $135 per share
Credit: $179 - $31 = $148
The goal is to have AMD stay below $136 from now until March 11. If it does, both legs will expire worthless and you will be able to keep $148.
If AMD rallies up to $136, you will buy 100 shares for $135 each, convert your bear call spread into a covered call, and sell your first leg.
Remember that I am long-term bullish on AMD, but short-term neutral to slightly bearish. If you want to set up a BCS on AMD, you want to be willing to purchase the shares to cover for your second leg.
If you have more capital or want to use margin, you can set up multiple contracts at once. Some members may set up 10 contracts at once, meaning they can collect $1,480 of credit.
In the end, feel free to tweak the numbers to your own risk-tolerance.
Have a wonderful weekend! 😀
Steve and the Call to Leap Team
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