I'd say it's time to pull the trigger on XOM in the OOP as they are testing $80 and not likely to go much lower. In the LTP, our Las Vegas play was:
- Sell 5 XOM 2019 $80 puts for $8.50 ($4,250)
- Buy 10 XOM 2019 $70 calls for $15.20 ($15,200)
- Sell 10 XOM 2019 $85 calls for $6.25 ($6,250)
The trade still works but a big pricey for the OOP with the obligation to own $40,000 worth of XOM. Instead, for the OOP, let's do the following:
- Sell 3 XOM 2019 $70 puts for $5.20 ($1,560)
- Buy 5 XOM 2019 $70 calls for $13.65 ($6,825)
- Sell 5 XOM 2019 $80 calls for $7.60 ($3,800)
That will give us a net entry of $1,465 on the $5,000 spread that's 100% in the money to start so all XOM has to do is not fall below $80 and we make $3,535 (241%) back on the cash. Our obligation is to own 300 shares at $70 ($21,000) and ordinary margin on that is just $2,100 so it's a nice, efficient way to make $3,535 if you like that sort of thing...
Another good one for the OOP is our Vegas SVU spread (cheaper now). While it may be a long road to recovery for them, we can get some great premium so let's take advantage.
- Sell 25 SVU 2019 $4 puts for $1.10 ($2,750)
- Buy 50 SVU 2019 $2 calls for $1.75 ($8,750)
- Sell 50 SVU 2019 $3.50 calls for 0.95 ($4,500)
So here we're netting into the $7,500 spread that's 100% in the money for just $1,500 so our upside is $6,000 (400%) and our worst case is owning 2,500 shares of SVU at $4 ($10,000) - plus whatever we lose on the spread.
Even in a crappy market, there are bargains to be had and, as long as the market isn't collapsing, our hedges should protect us from most foreseeable, immediate damage.
