I have two new trades.

music selection:  “Sweetest Thing” — U2

I have a bullish and bearish trade today.   For the bullish trade, I opened a spread in MMM.  For the bearish trade, I bought long dated puts on Delta Airlines (DAL).

With MMM trading at 145.78, I bought the 130/135 strikes bull call spread.  I paid 4.20 per share for the 19JUN2020 expiry calls.  The trade will be in force for about 29 days and enjoys 7.39% downside protection.  Should that not be breached, the full profit of 160 dollars (two spreads) will be earned.  Against 840 dollars of capital at risk that is an expected return of 19% or 224% annualized.

For the bearish trade, I’m betting against the largest domestic airline.  They have huge costs and a crushing debt load.  Delta will survive.  But I suspect common shareholders will be wiped out in reorganization.  I bought the 21MAR2021 20 strike puts for 5.25 a share.  I have 1,050 in capital at risk (two contracts) and I am targeting 2,950 in profit in bankruptcy.  That is about 281% in yield.

Devour your prey raptors!

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New trades

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One thought on “New trades

  • May 24, 2020 at 2:20 am
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    Believe it or not, you might not have missed out on HTZ. The post-bankruptcy price is still 2.84 and you can but a put at the $1 strike for 65 cents EXPIRING IN JANUARY 2022!

    Avis (CAR) seems to have benefited from the last two months’ optimism, but they are leveraged to the eyeballs and were posting negative FCF in the billions even before the current crisis.

    Reply

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