30-day implied volatility is at a whopping 280%. A trade idea with a ridiculous return on capital at max, regardless of whether you strip naked (i.e., short put) or spread it.
Metrics:
Notional Risk: $784
Max Profit: $216
ROC at Max as a Function of Notional Risk: 27.6%
ROC at 50% Max as a Function of Notional Risk: 13.8%
Break Even/Cost Basis in Stock if Assigned: 7.84
Comments: I'm not usually fond of meme stocks, but when I can potentially get 27.6% by selling a 50% out of the money put, well, I just might dip my toe in.
As a potential variation, consider spreading it by buying the October 15th 3 for .08 and selling the 10 for 2.16, resulting in a 7-wide that you're getting paid 2.08 for on a buying power effect of 4.92 -- a max profit ROC potential of 42.3%. Point in fact, I kind of like the spread better for defining the risk on a reduced buying power effect.
* -- October 15th expiry as of Friday's close.
Metrics:
Notional Risk: $784
Max Profit: $216
ROC at Max as a Function of Notional Risk: 27.6%
ROC at 50% Max as a Function of Notional Risk: 13.8%
Break Even/Cost Basis in Stock if Assigned: 7.84
Comments: I'm not usually fond of meme stocks, but when I can potentially get 27.6% by selling a 50% out of the money put, well, I just might dip my toe in.
As a potential variation, consider spreading it by buying the October 15th 3 for .08 and selling the 10 for 2.16, resulting in a 7-wide that you're getting paid 2.08 for on a buying power effect of 4.92 -- a max profit ROC potential of 42.3%. Point in fact, I kind of like the spread better for defining the risk on a reduced buying power effect.
* -- October 15th expiry as of Friday's close.
