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Tuesday, May 7, 2024

Top Trades for Tue, 16 Feb 2016 10:11 – CAKE, UNG

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Top Trades for Tue, 16 Feb 2016 10:11 – CAKE, UNG
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Dollar strong.  Should be good for /NKD (15,860 – right where we quit) if our indexes turn back up.  

CAKE is tonight, I like them but they already bounced 10% off the lows.  We can still sell the March $46 puts for $1 and pick up the $45 ($5)/$49 ($2.40) bull call spread for $2.60 and that's net $1.60 on the $4 spread and worst case is having your CAKE at net $47.60.

Another good one is UNG, back under $7 after testing $9 so once again we can get some fantastic prices on a long position betting natural gas doesn't stay at $2:

  • Sell 20 UNG 2018 $8 puts for $2.30 ($4,600)
  • Buy 50 UNG 2017 $5 calls for $2.30 ($10,150)
  • Sell 50 UNG 2017 $8 calls for 0.80 ($4,000)

That's net $1,550 on $15,000 worth of spreads that are $10,000 in the money at $7 and worst case is owning 2,000 shares of UNG at net $8.775 ($17,550).  Figure nat gas won't be $1 so UNG should stay over $4 and you risk losing about $8,000 vs potential $14,450 reward – good ratio!