Bought the Apr 425/400 put spread at 4.80 can close at 7.00... gets you a $220 profit per one lot... not a big win with stock down $13 if this spread was a hedge against stock.. like i said below, i thought it was too far out of the money
--------------------------------------------------------------------------------------------
18apr -mike again hits CMG with a trade. here is the video 18apr video . he is doing a put spread ahead of earnings.
Buy the Apr425 put for 6.70
Sell the Apr400 put for 1.90
total debit $4.80 ($480 per one lot)
mike mentions this spread is only 1% of the price of the stock. true. now mike just had another trade on options action on 13apr...heres the post on that 13apr CMG trade . options are pricing in about a $20 move with stock near 440. with mikes spread, stock would need to drop below 420 at opex to be profitable.. which is right to where options are priced in for a move. unless he expects an oversize down move (which options are not pricing in) i think this put spread is too far out of the money. yes it can get a 5-1 payout IF stock is at 400 or lower. to me, $480 is expensive.. needing a move GREATER than current options are pricing in to profit.. it may indeed work but i would look to do something cheaper.. Risk less to make more they say on the show.
mike needs it below 420 to profit, options say move to 420 so i will assume mikes guess is right and it drops below 420.. i would look at a 420/410/400 put butterfly..after hours quotes are .10/1.40... mark of .75 .. so would put in order to try to get a .75 fill.. lets just say we buy for 1.00... now if you had budgeted that 1% of the stock price you can buy 4 of these put flys, your payout ratio would be 9-1 if it pins at 410.. max profit of $3600,
takeaway is that i think mikes spread is too far out of the money and too expensive.. a one lot of my put fly makes as much as mikes spread at 410 pin with 25% of the premium risk.
