Peloton “Triple Play Hedge”
Triple Play Hedge, don’t google it! You won’t find it! This is a strategy I made up which worked every time I used it. Let’s hope it doesn’t fail me now.
You can read about my Triple Play Hedge by hitting the link. I have a page that explains it. It’s probably not for Grasshoppers, and you need a decent size account to execute. Main Street beats Wall Street is a learning site but I do post every trade I make. You will have to pick and choose which strategies I use that would be good for your level.
A Triple Play Hedge involves buying a stock and selling 3 separate Call Options. Each Call has the amount of contracts to match up with the shares of stock bought. In this case I bought 1000 shares of Peloton and I sold (3) 10 contract Calls with different Strike Prices. With this Triple Play Hedge I bought the stock at $107.75 and sold 10 contracts each of the $109 Call, the $118 Call and the $120 Call. 1 Call is Covered and the other 2 are Naked.
I previously had the stock and sold the $109 Call to make a Covered Call. Then I sold another Call which was the $118 Strike Price. Today I sold another Naked Call to complete the Triple Play Hedge. Today I sold 10 contracts of the 10/9/20 $120 Call for a premium of 55¢.
Sell to Open 10 PTON 10/9/20 $120.00 C @ 55¢ (+$550)
Below is the complete Triple Play Hedge.
So, what do I hope happens? I hope on Friday the stock closes above $109 but below $118. If this happens my Covered Call will get assigned and the 2 Naked Calls will expire.
Why do I do this? In the case the stock drops I have 3 Calls as insurance. If the stock closes drops below my 1st Strike Price and goes below my buy-in price, I have the 3 premiums to make up for the loss in the stock price. If the stock falls below the $107.75 price I have the $3500, $800 and $550 premiums in my account to make up for any stock loss.
If the stock goes up to the $118 Strike Price I’ll cover by buying more shares. My feeling is that the stock will stay below my 2nd Strike Price of $118. If we get a stimulus I might have to cover both the $118 and the $120.
Peloton Triple Play Hedge
10/2/20 – Buy 1000 Shares PTON @ $107.75
10/5/20 – Sell to Open 10 PTON 10/9/20 $109.00 C @ $3.50 (+$3500)
10/5/20 – Sell to Open 10 PTON 10/9/20 $118.00 C @ 80¢ (+$800)
10/6/20 – Sell to Open 10 PTON 10/9/20 $120.00 C @ 55¢ (+$550)
If interested, please read my Triple Play Hedge page and send me any questions.
Successful trading,
Steve
The Options Coach