SE is an online gaming and multimedia entertainment company based in Singapore. The company reported a profit in early March that missed earnings estimates but topped revenue 72% year over year, while bookings more than doubled in the fourth quarter. The stock initially burst after the day of the report but ended flat. SE was then embroiled in the tech pullback, which dragged stocks down 28% in just three weeks.
That’s the bad news. The much better news is that stocks found solid support at their 20-week moving average, a trendline that marked the location of a higher reversal almost exactly a year ago. The 20 weeks were instrumental in running the stock on a monster rally that spiked 8x over the past year. The latest correction seems dramatic as the stock is up 14% from the bottom over the past four days. In short, the rally remains intact and seems to have legs.
If you’re okay with SE’s uptrend continuing, consider the following trade, which depends on the stock staying above $ 220 by the time it expires in five weeks.
Buy to open SE 16Apr21 210 Put (SE210416P210)
Sold to Open SE 16Apr21 220 Put (SE210416P220) for $ 3.90 credit (sale of a vertical)
This loan is $ 0.10 below the midpoint of the options spread when SE was trading at $ 235. If the stock doesn’t recover quickly from here, you should be able to get close to that amount.
Your commission on this trade is only $ 1.30 per spread. Each spread would then be $ 388.70. This reduces your purchasing power by $ 1,000 and makes your investment $ 611.30 ($ 1,000 – $ 388.70). If SE closes above $ 220 on April 16, both options will expire worthless and your return on the spread will be 63% ($ 388.70 / $ 611.30) or 611% on a yearly basis.
As with all investments, you should only trade options with money that you can really afford to lose.
Have fun trading,
Tags: Bearish Options Strategies, Bullish Options Strategies, Monthly Options, Portfolio, Profit, Profits, Puts, Risk, SE, Sea Limited, Vertical Put Spread, Weekly Options
This entry was posted on Monday, March 15th, 2021 at 2:19 pm and is filed under Strategy for Profit Reports, Last Minute Strategy, Monthly Options, Trading Option of the Week for Stock Options, Weekly Options.