Quick Take: Low Cost Bullish Put Hedge Strategy
Time Frame: One to Twelve Weeks.
Stock: Bullish Market Edge Opinion – Long Stock Position.
Desired Stock Price Direction: Sideways to Up.
Option Position: Short ATM Put – Long ATM -1 Put (Bullish Put Credit Spread) and Long ATM deferred Put.
Desired Result: Stock stays flat or moves up in price.
Maximum Risk: The stock declines in value. The loss is offset by the amount of the credit spread and the appreciation in the deferred anchor put.
Summary: If the stock stays flat or moves up, the credit spread will expire worthless and you will keep the credit. However, the deferred put will decline in value in line with the long stock position price rise. If the long stock position moves down, the loss will be offset by the amount of the credit spread and the appreciation in the deferred anchor put.
Quick Take: Low Cost Bearish Call Hedge Strategy
Time Frame: One to Twelve Weeks.
Stock: Bearish Market Edge Opinion – Short Stock Position.
Desired Stock Price Direction: Sideways to Down.
Option Position: Short ATM Call – Long ATM +1 Call (Bearish Call Credit Spread) and Long ATM deferred Call.
Desired Result: Stock stays flat or moves down in price.
Maximum Risk: The stock rises in value. The loss is offset by the amount of the credit spread and the appreciation in the deferred anchor call.
Summary: If the stock stays flat or moves down, the credit spread will expire worthless and you will keep the credit. However, the deferred call will decline in value in line with the stock’s price decline. If the short stock position moves up, the loss will be offset by the amount of the credit spread and the appreciation in the deferred anchor call.
The following are this week’s Low Cost Put Hedge Selections. Each week, if conditions warrant one or more new stock positions are added to the Open Positions list. These stocks have a Bullish technical Opinion from Market Edge. The stocks and option spreads are added to the portfolio based on Monday’s opening prices. The stocks are removed from the portfolio after twelve weeks or if the Market Edge Opinion is downgraded from Bullish. To access The Low Cost Put Hedge informative booklet click on the Get The Booklet tab located on the home page or at the bottom of this page.
This Week’s Low Cost Bullish Put Selections
There are two new selections this week: IBM & JNJ.
IBM-The current technical condition for IBM is strong and the underlying indicators should keep the current uptrend intact. The stock has outperformed the market over the last 50 trading days when compared to the S&P 500. The MACD-LT is confirming that the intermediate-term trend is bullish. Chart formation indicates a strong rising trend. Upside momentum, as measured by the 9-day RSI indicator is positive but is beginning to slow. Over the last 50 trading sessions, there has been more volume on up days than on down days indicating that IBM is under accumulation, which is a bullish condition. The stock is trading above a rising 50-day moving average. This validates the strong technical condition for IBM. The stock is above its 200-day moving average but the 200-day is pointed down indicating that the intermediate-term trend is still in question.
JNJ-The technical condition of JNJ is improving as several of the pertinent indicators have turned positive and the stock appears to be under accumulation. The stock is underperforming the market over the last 50 trading days when compared to the S&P 500. The MACD-LT, is confirming that the intermediate-term trend is bullish at this time. A close above $131.00 is a number to watch to confirm a trend reversal. Momentum as measured by the 9-day RSI is gaining in strength. Over the last 50 trading sessions, there has been more volume on up days than on down days indicating that JNJ is under accumulation, which is a bullish condition. The stock is trading above a rising 50-day moving average which confirms the improving technical condition. JNJ is above its rising 200-day moving average which is pointed up adding to the stocks improving technical condition.
Current Open Positions
| Market Posture: | Bullish | VIX–> | 13.57 | Neutral | ||||||
| Stock Price Is Monday’s Opening | * After Symbol Denotes Short Stock Position | |||||||||
| Short Put | Long Put | Anchor | Anchor | Anchor | ||||||
| # Of | Stock | 03/08/19 | 03/08/19 | Credit | Put | Put | Put | Approx | Approx | |
| Stock | Weeks | Price | Strike | Strike | Spread | Exp. Date | Strike | Debit | Div Date | Dividend |
| LOW | 8 | $103.32 | 103.0 | 101.0 | $0.40 | 04/18/18 | 97.5 | $5.68 | N/A | N/A |
| V | 8 | $149.60 | 150.0 | 148.0 | $0.77 | 03/15/19 | 135.0 | $4.38 | N/A | N/A |
| BABA | 6 | $186.53 | 187.5 | 185.0 | $1.15 | 04/18/19 | 155.0 | $9.30 | N/A | N/A |
| XOM | 6 | $83.90 | 81.0 | 79.0 | $0.72 | 04/18/19 | 70.0 | $2.57 | N/A | N/A |
| JPM | 5 | $105.65 | 106.0 | 104.0 | $0.73 | 04/18/19 | 105.0 | $4.80 | N/A | N/A |
| UAL | 2 | $85.61 | 86.0 | 84.0 | $0.74 | 05/17/19 | 90.0 | $4.65 | N/A | N/A |
| IBM | 1 | $139.87 | 140.0 | 138.0 | $0.63 | 06/21/19 | 140.0 | $6.05 | N/A | N/A |
| JNJ | 1 | $138.76 | 139.0 | 137.0 | $0.59 | 06/21/19 | 140.0 | $5.20 | N/A | N/A |
Results for this week’s trades will be posted over the weekend on the Scoreboard.