GRMN, MA, SPLK, WDAY: Frigid Four

Please Note: Four Separate Rolls

 

1. Vertical Roll on Garmin Ltd. (Nasdaq: GRMN) to January (2nd week)

  • “Buy to Close” December (2nd week) $64 Put

and

  • “Sell to Close” December (2nd week) $65 Put

and

  • “Buy to Open” January (2nd week) $68 Call

and

  • “Sell to Open” January (2nd week) $66 Call

Option Symbols: GRMN181214P64 and GRMN181214P65 and GRMN190111C66 and GRMN190111C68

Limit Order Price: Net credit of $0.80 or more ($80 per spread)–day order

If your broker doesn’t allow four-legged trades, then you’ll have to do two trades:

(a) Close December (2nd week) $192.50/$197.50 Put Spread: Net credit of $0.15 or more ($15 per spread)

  • “Buy to Close” December (2nd week) $64 Put

and

  • “Sell to Close” December (2nd week) $65 Put

(b) Open January (2nd week) $66/$68 Call Spread: Net credit of $0.65 or more ($65 per spread)

  • “Buy to Open” January (2nd week) $68 Call

and

  • “Sell to Open” January (2nd week) $66 Call

Directional View for Underlying Stock: Neutral to Bearish

Trade Style: Time-value decay (moderate risk)

  • Tell your broker:
  • For the four-legged vertical roll (preferred)

I’d like to enter a four-legged option order on Garmin Ltd. (GRMN) stock. Specifically, I want to buy to close the December (2nd week) $64 put, sell to close the December (2nd week) $65 put, buy to open the January (2nd week) $68 call and sell to open the January (2nd week) $66 call for a net credit of $0.80 per share or more.

  • For the two-part trade:
I’d like to enter an option spread order on Garmin Ltd. (GRMN) stockSpecifically, I want to buy to close the December (2nd week) $64 put and sell to close the December (2nd week) $65 put for a net credit of $0.15 per share or more. 

I’d like to enter an option spread order on Garmin Ltd. (GRMN) stock. Specifically, I want to buy to open the January (2nd week) $68 call and sell to open the January (2nd week) $66 call for a net credit of $0.65 per share or more. 

Please note: The important thing is to achieve a net credit on the vertical roll (i.e., both trades) of $0.80 or more. The specific limit prices of the individual “close December (2nd week) put spread” and “open January (2nd week) call spread” trades are just starting points and should be adjusted as needed, keeping the $0.80 net credit of the overall vertical roll in mind.

Rationale for Trade:

  • With GRMN trading at $65.00, our December (2nd week) $64/$65 put debit spread is completely out-of-the-money, but too close for comfort so we need to roll in order to generate additional time-value decay credits and to avoid the risk of automatic exercise on our long 65 put and being short the stock over the weekend.
  • Before this roll, this trade has already generated a net debit of -0.50 (-0.50 initial debit), so rolling for a 0.80 credit generates a potential profit of 0.30 per share (0.80 – 0.50) if the stock can remain below 66 at January 11th expiration and the 66/68 call spread expires worthless. 
  • Bearish seasonality. Between December 14th and January (2nd week) expiration, GRMN has risen only four times in the last 10 years.

Price Adjustments Regarding the GRMN Trade:

The limit credit price of 0.80 I suggest above is a starting point. If it doesn’t fill within 15 minutes, I recommend reducing the limit credit by a nickel per share and waiting another 15 minutes. Repeat the process until you get filled no later than the end of trading on Friday December 14th.

 

2. Vertical Roll on Mastercard (NYSE: MA) to January (1st week)

  • “Buy to Close” December (2nd week) $197.50 Put

and

  • “Sell to Close” December (2nd week) $192.50 Put

and

  • “Buy to Open” January (1st week) $192.50 Put

and

  • “Sell to Open” January (1st week) $197.50 Put

Option Symbols: MA181214P192.5 and MA181214P197.5 and MA190104P192.5 and MA190104P197.5

Limit Order Price: Net credit of $0.05 or more ($5 per spread)–day order

If your broker doesn’t allow four-legged trades, then you’ll have to do two trades:

(a) Close December (2nd week) $192.50/$197.50 Put Spread: Net debit of $2.20 or less ($220 per spread)

  • “Buy to Close” December (2nd week) $197.50 Put

and

  • “Sell to Close” December (2nd week) $192.50 Put

(b) Open January (1st week) $192.50/$197.50 Put Spread: Net credit of $2.25 or more ($225 per spread)

  • “Buy to Open” January (1st week) $192.50 Put

and

  • “Sell to Open” January (1st week) $197.50 Put

Directional View for Underlying Stock: Neutral to Bullish

Trade Style: Stock must move (aggressive risk)

  • Tell your broker:
  • For the four-legged vertical roll (preferred)

I’d like to enter a four-legged option order on Mastercard (MA) stock. Specifically, I want to buy to close the December (2nd week) $197.50 put, sell to close the December (2nd week) $192.50 put, buy to open the January (1st week) $192.50 put and sell to open the January (1st week) $197.50 put for a net credit of $0.05 per share or more.

  • For the two-part trade:
I’d like to enter an option spread order on Mastercard (MA) stockSpecifically, I want to buy to close the December (2nd week) $197.50 put and sell to close the December (2nd week) $192.50 put for a net debit of $2.20 per share or less. 

I’d like to enter an option spread order on Mastercard (MA) stock. Specifically, I want to buy to open the January (1st week) $192.50 put and sell to open the January (1st week) $197.50 put for a net credit of $2.25 per share or more. 

Please note: The important thing is to achieve a net credit on the vertical roll (i.e., both trades) of $0.05 or more. The specific limit prices of the individual “close December (2nd week) put spread” and “open January (1st week) put spread” trades are just starting points and should be adjusted as needed, keeping the $0.05 net credit of the overall vertical roll in mind.

Rationale for Trade:

  • With MA trading at $195.35, our December (2nd week) $192.50/$197.50 put debit spread is partially in-the-money, so we need to roll in order to generate additional time-value decay credits and to avoid automatic assignment on our short 97.50 put and being long the stock over the weekend.
  • Before this roll, this trade has already generated a net credit of 0.80, so rolling for a 0.05 credit generates a potential profit of 0.85 per share (0.05 + 0.80) if the stock can rise above 197.50 at January 4th expiration and the 192.50/197.50 put spread expires worthless. 
  • Bullish seasonality. Between December 14th and January (1st week) expiration, MA has risen eight times in the last 10 years.

Price Adjustments Regarding the MA Trade:

The limit credit price of 0.05 I suggest above is a starting point. If it doesn’t fill within 15 minutes, I recommend reducing the limit credit by a nickel per share and waiting another 15 minutes. Repeat the process until you get filled no later than the end of trading on Friday December 14th.

 

Please Note: The following recommended opening trade only applies to those VT members who already have positions in the Splunk Put Debit Spread. Do NOT do this trade as an initial position.

2. Vertical Roll on Splunk (Nasdaq: SPLK) to January (1st week)

  • “Buy to Open” January (1st week) $103 Put

and

  • “Sell to Open” January (1st week) $105 Put

Option Symbols: SPLK190104P103 and SPLK190104P105

Limit Order Price: Net credit of $0.90 or more ($90 per spread) — day order

Directional View for Underlying Stock: Neutral to Bullish

Trade Style: Time-value decay (moderate risk)

  • Margin requirement: $200 
  • Tell your broker:

I’d like to enter a spread order on Splunk (SPLK) stock. Specifically, I want to buy to open the January (1st week) $103 put and sell to open the January (1st week) $105 put for a net credit of $0.90 per share or more. 

Rationale for Trade:

  • With SPLK trading at $105.10, our December (2nd week) 95/96 put debit spread is completely out-of-the-money, so we need to roll again to generate time-value decay credits that move this trade closer to profitability.
  • Just let the December (2nd week) 95/96 put spread expire worthless; no need to close out either option leg.
  • Widening the spread to two points from one point enables a sizable credit while still maintaining risk within reasonable parameters.
  • Flipping to a bull put spread from a bear put spread makes sense now that seasonality has turned bullish and the stock responded positively to its recent earnings report.
  • This trade has already generated a net debit of -0.50 (initial -0.50 debit), so letting the December (2nd week) put spread expire worthless and rolling for an additional 0.90 credit generates a potential profit of 0.40 (0.90 – 0.50) if the stock can remain above $105 at January 4th expiration.
  • Bullish seasonality. Between December 14th and January (1st week) expiration, SPLK  has risen in each of the past six years since the company’s IPO in April 2012.  I love 100% win rates!

Price Adjustments Regarding the SPLK Trade:

The limit credit price of 0.90 I suggest above is a starting point. If it doesn’t fill within 15 minutes, I recommend reducing the limit credit by a few pennies per share and waiting another 15 minutes. Repeat the process until you get filled no later than the end of trading on Friday December 14th.

 

Please Note: The following recommended opening trade only applies to those VT members who already have positions in the Workday Put Debit Spread. Do NOT do this trade as an initial position.

3. Vertical Roll on Workday (Nasdaq: WDAY) to January (1st week)

  • “Buy to Open” January (1st week) $157.50 Put

and

  • “Sell to Open” January (1st week) $160 Put

Option Symbols: WDAY190104P157.5 and WDAY190104P160

Limit Order Price: Net credit of $0.95 or more ($95 per spread) — day order

Directional View for Underlying Stock: Neutral to Bullish

Trade Style: Time-value decay (moderate risk)

  • Margin requirement: $250 
  • Tell your broker:

I’d like to enter a spread order on Workday (WDAY) stock. Specifically, I want to buy to open the January (1st week) $157.50 put and sell to open the January (1st week) $160 put for a net credit of $0.95 per share or more. 

Rationale for Trade:

  • With WDAY trading at $161.25, our December (2nd week) 139/140 put debit spread is completely out-of-the-money, so we need to roll again to generate time-value decay credits that move this trade closer to profitability.
  • Just let the December (2nd week) 139/140 put spread expire worthless; no need to close out either option leg.
  • Widening the spread to 2.5 points from one point enables a sizable credit while still maintaining risk within reasonable parameters.
  • Flipping to a bull put spread from a bear put spread makes sense now that seasonality has turned bullish and the stock responded positively to its recent earnings report.
  • This trade has already generated a net debit of -0.50 (initial -0.50 debit), so letting the December (2nd week) put spread expire worthless and rolling for an additional 0.95 credit generates a potential profit of 0.45 (0.95 – 0.50) if the stock can remain above $160 at January 4th expiration.
  • Bullish seasonality. Between December 14th and January (1st week) expiration, WDAY  has risen in five of the past six years since the company’s IPO in October 2012.  

Price Adjustments Regarding the WDAY Trade:

The limit credit price of 0.95 I suggest above is a starting point. If it doesn’t fill within 15 minutes, I recommend reducing the limit credit by a few pennies per share and waiting another 15 minutes. Repeat the process until you get filled no later than the end of trading on Friday December 14th.

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