DailyPlay Opening Trade (UAA) May 24, 2022

View UAA Trade

Strategy Details

Strategy: Short Cash Secured Put

Direction: Bullish

Details: Sell to Open 2 Contracts June 24, 2022 $9 Cash Secured Puts @ $0.40 Credit.

Total Risk: This trade has a max risk of $1,720 (2 contracts x $860 per contract). 

Counter Trend Signal: This is a Bullish strategy on a stock that is experiencing Bearish 1M and 6M trends.

1M/6M Trends: Bearish/Bearish

Technical Score: 1/10

OptionsPlay Score: N/A

Entering the Trade

Use the following details to enter the trade on your trading platform. Please note that if there is a multi-leg option strategy, it should be entered as a single trade. 

Investment Rationale

Here’s a bit of a different play idea than I’ve given you in the past, and it involves selling a Cash Secured Put with my willingness to purchase and hold the shares of stock if exercised. (If your brokerage account doesn’t let you sell Cash Secured naked Puts, then pass on this trade idea for now, but I’d suggest looking around for another firm that does allow it; most do.)

I’m looking at shorting the Under Armour (UAA) June 24th $9 puts for $0.395 based on Monday’s mid-closing price. (SPX futures are down over 30 points as I write this, so we could easily get more than this amount of premium tomorrow after the open.) Earnings are out of the way till August so that’s not going to be an issue. This comes down to playing the range we’ve seen for the bulk of the past four years (mid-$20s to high-single digits). With the weekly Setup on a -7 and the Sequential Countdown on a -12, I’m game to sell the $9 puts to make my effective cost if exercised ~ $8.60.

That’s not a bad entry for a buy-and-hold strategy near the bottom of the range. Again, only do this Daily Play idea if you are willing and able to buy at least 100 shares of stock for every put option you short. If you use our theoretical $100K account to size your trades and don’t want to risk more than the typical 2% on any single trade, then you’d sell 2 of these put options (representing $1800 worth of potential stock purchase at expiration). If the stock holds here or rallies and you don’t get exercised, you collect about $80 total premium on the 2 puts. So, we’re getting paid to watch and wait to see if we could buy the stock at $9. I’m totally fine either pocketing the premium or getting exercised.

UAA – Weekly