Another tough day for the growth stocks. Primary reason: due to the inflation the value of future earnings is diminishing. But to see so many large companies lose over 50% of their value so quickly is quite fascinating.
It's easy to get tempted to sell put options against some of these big drops buy purely looking at the price movements but it can be very risky. Paypal is a perfect example. They became very popular as they came up with a new, secure way to process online purchases. Today, there are many companies offering similar or even better solutions so Paypal's value had to diminish at some stage.
Today I felt like taking another riskier shot at the market by trading #ARKK ( #ArkInnovationETF ).
Just like pretty much all growth stocks, ARKK has also lost a significant portion of its value. After 52% of drop since the end of November I thought it's time to try my luck with it. The IVR is still very high therefore the premium that the options pay is exceptional. However, I must admit that this is a risky trade with both legs are just outside of the 1SD (standard deviation), which makes the PoP (probability of profit) 70%. For those who want to try this trade with less risk, I suggest going wider with the strangle.
The stats
Trade Type: Short Strangle
Strike: $50 / 69
Expiry: 20 May
Delta: -1.6
IV Rank: 65.6
Premium: $2.31
Cap Req: $590
Annualised Prof at Expiry: 397%
Today's closed deals:
Let me know your thoughts.
Finally able to exit this position!
Closed at $3.10 for an annualised profit of 133%.
It was a fascinating journey with this one:
I will most likely open another position in this ETF shortly as I expect the volatility to go up again. In fact, I might open the same position tomorrow at a higher price.
This trade requires a bit of work but it's getting there.
Rolled down the call side to $52 for $0.28 credit.
Total credit: $4.17
I must admit, I enjoy the challenge this ETF gives me.
Exited my inverted position by rolling to July $40 / 54, which cost me $3.70.
Now I have a fairly comfortable position with a decent credit.
Total credit: $3.89
Rolled down the call side again and went inverted at 45 / 43 for an additional $0.51 credit.
Total credit: $7.59
The freefall of this ETF just doesn't want to stop.
Rolled down the call side to $45 so now we have a $45 straddle.
Total credit: $7.08
Rolled down the call side to $47.22.
Total credit: $6.39
This stock is getting really ugly so I had to roll down the call again to $50.22.
Total credit: $5.85
I thought it was time to roll to June $45 / 54.22.
Total credit: $5.23
Rolled down the call side to $53.
Total credit: $4.93
The ETF continues sliding down so I had to roll down the call side to $56.
Total credit: $4.33
Rolled down the call side again to $62.
Total credit: $3.19
Rolled down the call side to $66.
Total credit in this deal: $2.68