AAOI -- High risk bullish trade
Updated
Still trying to avoid buying anything near all time highs but have learned that companies that seem cheap are not. I have added some hedge or kicker to these more riskier trades that I intend to leg out of if the price drops. I have no problem selling a 3 lot at the 12.5 strike for 1.30 but like the choice of taking some profit on a long put option should things fall apart and the stock craters. AAOI "a leading provider of fiber-optic access network products for the internet datacenter, cable broadband, telecom, and fiber-to-the-home" seems to be an area that could grow in the future and I think made IBD50 list at some point? I went all the way out to June because if price rises the trade can still be closed relatively quickly but if it collapses I will collect less in a shorter term trade and with time to recover by June I will just take profit on the long put leg and roll the short puts out in time. I bought 1 15 strike put and sold 3 12.5 strike puts for a credit of 1.45 This gives me the most choices and I am not above taking profit on the long 15 put and buying long puts at the 10 strike (backratio) should this thing really go off the rails........but this is a small trade and if things get that bad there should be lots of volatility to take advantage of.......wish me luck.
Note
Sold the 15 put this morning for 2.90 (bought for 2.45) Which kinda sucks to be honest. 40 cents additional cost basis reduction when the price of the stock dropped even before earnings and down this morning 10% or so on an earnings miss. I am going to leave the 3 short puts at 12.5 and hope to get assigned, could roll all the way to January for an extra buck but too much time and September roll only gets me 30 cents. I will look to add a couple put debit spreads to hedge off some of the risk if this does bounce some due to the chart being so ugly.Note
Legged back in to this trade on market strength for 1.70 (15 long put only) June is a long ways off and I would prefer to give up some of the premium I collected for a little downside protection and a choice to leg out again if I choose or just take a 3 lot at 12.5 if I want.Note
Legged out this morning after a 17% drop yesterday for 3.12 for a 1.30 gain in my cost basis reduction. I was hoping to get about that amount from the 1st drop instead of the .40 cents I got but can't complain this time. Starting to look like we will see 12.5 before long. This means if I am starting to doubt my assumption and I feel like AAOI could see the 10 or 8 handles I should take some of my gains and look to buy cheap puts below my 12.5 shorties as a backspread defense. Depends what the market gives me. But I would ideally like to pick those up on a bounce and I may not get one so I have to be willing to get long at the strike I sold.Trade closed manually
I closed the 3 short puts this morning for a scratch as price action for AAOI has been really weak as well as the market for triple witching....... I took another trade off as well for this reason as I am pulling in capital to redeploy should we get a chance with Brexit or Trade War continuation or just the market coming to its senses (Lol like that could happen)
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