Peloton “Triple Play Hedge”

If you’re a loyal reader you know I jumped out of some Long LEAPS positions yesterday. I locked in a whopping $8500 on a Monday. Some might say these stocks still have room to go up, but I say let me stick this profit in my mattress. And, if these stock go up, will I be losing potential money? I don’t think so! I’m already putting the money to work in positions I feel will do better, and will fit into my strategy.

This morning I did a Triple Play Hedge with Peloton (PTON). I bought 1000 shares at $43.70 and sold (3) 10 contract Calls, all expiring this Friday. I sold the $44 call for a premium of $1.75 ($1750),  the $48 Call for a premium of 75¢ ($750) and the $49 Call for a premium of 50¢ ($500). The stock is going up but if it goes down I have the 3 Calls as hedging. If the stock goes down my Short Calls increase in value. My $44 Call is covered with the 1000 shares, the other 2 are Naked. If the stock goes up to my $48 Call I’ll buy another 1000 shares to cover that Call. I feel this move will work out well.

Peloton – Triple Play Hedge

Buy 1000 Shares of PTON @ $43.70

Sell to Open 10 PTON 5/15/20 $44.00 C @ $1.75 (+$1750)

Sell to Open 10 PTON 5/15/20 $48.00 C @ $75¢ (+$750)

Sell to Open 10 PTON 5/15/20 $49.00 C @ 50¢ (+$500)

I like Peloton right now. The stock is doing well with the coronavirus. There are a lot of people staying home and still getting their exercising in. Peloton in the maker of the best smart stationary bike and fitness programs.

I’m hoping I get assigned on the 1000 shares and the other 2 Calls expire worthless. My total premium for this Triple Play Hedge is $3000. This position has a Covered Call but it also has 2 Naked Call so I give this trade a Risk Factor 3.

Successful Trading,

Steve

The Options Coach