Top Trade Alert – Aug 15 2022 – Stellantis (STLA)

    STLA Daily Chart - Aug 15 2022

    STLA/Jeddah – Primary revenues in Euros make them a little odd as we have to consider currency impacts differently. They are Chrysler/Dodge, Fiat, Alfa Romeo, Jeep, Maserati and, of course, the EU brands.

    About $170Bn in sales, $48Bn ($15/share) market cap and, like most auto makers – undervalued with $15Bn in profits so close to 3x p/e is just silly. Not only that but they have $20Bn cash net of debt so winner, winner – especially as they now have very liquid options.

    So, for the LTP, let’s:

      • Sell 20 STLA 2024 $17.50 puts for $4.20 ($8,400)
      • Buy 50 STLA 2024 $15 calls for $2.50 ($12,500)
      • Sell 50 STLA 2024 $20 calls for $1 ($5,000)

    That’s a net $900 credit on the $25,000 spread and our worst case is owning 2,000 shares at $17.50 ($35,000), which would simply be a nice, initial entry in the LTP on a stock that pays a $1.09 (7%) dividend. If we don’t get to own it, we’ll get called away with a $25,900 (2,877%) profit in 18 months – awww…

    In our Dividend Portfolio, let’s just sell 20 of the 2024 $17.50 puts for $4.20 ($8,400) as it adds cash and we certainly wouldn’t mind owning them for the long-haul. If assigned we’re at net $13.30, which is 12% below the current price and then we sell $3 worth of 2026 puts and calls and our net is down to $10.30 – close to 1/3 off the current price. That’s a worst case we could certainly live with.