Rocky’s Weekly Stock Picks
This weeks picks are going to be some or all options spread trades. What prompted this was the price drop of WKHS to $6.08. We are not amused. Still, we own the shares and all of our calls written are OTM. We may end sell a single order Put, if we can snag the 10% on open Monday.
But can we do better?
WKHS - The idea of a Debit Spread is pretty simple. The leg you buy is the one you sell, and the one you sell is the one you would buy if exercised. So if we Buy the 10/15 $25 Put for $19.10, we could exercise and sell 100 shares at $25 a piece. Of course, we don’t have 100 shares, so we’d need to buy them, If we sell a $24 Put for $18.95, and it got exercised (and it would being that deep in-the-money), we’d buy the 100 shares for $24 a share. The premium cost is only $15, so we’d make $85 on a $15 down payment.
If we can’t get snag anything good at open, the $42 Put Buy / $41 Put Sell is our backup plan. It’s a near-guaranteed 12% return on $100. There is nothing to complain about there. |BBIG - At $5 a share, we’re confident the price isn’t going to do anything crazy on the upward side. Options contracts are available pretty deep in the money. Let’s take a look and see what we come up with.
Admittedly, we bought a few different spreads for the weeks of 10/15 and 10/22. Calls and puts. We’re recommending that you move on, or at least stay conservative and go for an easy 8%. Basically we feel that this stock is just as likely to go to $8 as it is to stay at $5. We doubt the price will trend much lower, but it very well might.CODX -The current price is close to $8.50. We’re trying for a 10/29 Debit Call spread, $10 Call Sell / $9 Call Buy at $20. We’ll then set a GTC close order for $40. This is our recommendation. Re-assess in 3 days.
PFLT - $13.23 a share, and options aren’t particularly volatile. This is actually a pick for monthly income. Annualized it’s 8%. This may pale in comparison to 8% a week, but we need to offset our costs if any of our other picks work against us.
NAK - $0.42 a share, and options only trade monthly. Let’s go for a 14% return. Buy the $1 Put, Sell the $0.50. Let’s think, what is the worst case scenario? Getting assigned NAK shares at an effective $0.43 a share? This is one of our favorite long-term holds.
Altermately, you could buy the 1/19/2024 LEAP at $0.50 strike, and sell this month’s $0.50 strike call. Easy 10%.
If somehow the price does move, it will need to more than triple before we actually lose money. If that starts to happen, we’ll just close our position and sell a higher strike…most likely. That’s a bridge we’ll cross if/when we come t oit.
