SNAP Wheel Strategy Short Put
Updated
Snapchat is down 25% from its highs, and while it has bounced up a little bit from the highs, it still remains oversold. Now might be the right time to sell a put into weakness and collect premium.
Trade Idea:
For both of these trade ideas, if you believe in Snapchat's fundamentals, which are pretty modest, you can hold on to the stock and sell covered calls (70-80% OTM) and collect premium until you get assigned. Once you do get assigned, you can come back to selling cash-secured puts again.
Trade Idea:
- Medium Risk: The 44 Put expiring 4/16 for $1 credit. It has a 81.5% Prob. OTM and if you do get assigned, your cost-basis per share will be $43 and it is a good place to own as you will be in the middle of the volume profile for the last 6 months meaning that you won't be buying at the top but at the same time the bottom.
- Aggressive: The 47 Put expiring 4/16 for $1.5 credit. It is right below support and has a higher 75% Prob. OTM. While you have a higher chance of getting assigned with this one, considering the support level that hasn't been breached for months, you still have high odds of collecting the premium and not get assigned. Even if you do get assigned, your cost-basis per share will be $45.5.
For both of these trade ideas, if you believe in Snapchat's fundamentals, which are pretty modest, you can hold on to the stock and sell covered calls (70-80% OTM) and collect premium until you get assigned. Once you do get assigned, you can come back to selling cash-secured puts again.
Trade closed: target reached
Close Short Puts:The 44-strike put is currently trading for $0.32 resulting in a $0.68 or 68% profit per contract.
The 47-strike put is currently trading for $0.48 resulting in a $1.02 or 68% profit per contract.
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