A bearish and a bullish spread.
music selection: “If You Needed Somebody” — Bad Company
weigh-in: 220.0 +1.0
First up, I’m betting against Macy’s (M). I don’t expect them to be bankrupt anytime soon (and I actually have a stink bid open on one of their bonds). But I don’t expect them to suddenly return to glory – ever. Retail is a two horse race between Amazon and Wal-Mart. So with M trading at 7.07, I am opening a bear put spread at the 8/9 strikes and 18SEP2020 expiry. I got pricing of 80 cents per share on 18 spreads. That puts 1,440 capital at risk for 40 days with 13.15% downside protection. Should that not be breached, the full profit potential of 360 dollars will be realized for a 25% gain or 294% annualized.
New to the raptor is Zendesk (ZEN). This is a SaaS company that is revolutionizing customer service. You can’t run a proper call in center or help desk with similar software and ZEN is the marketshare leader and fastest growing competitor in the space. I’m being a little more aggressive here as my bull call spread is not in the money. Or at least one strike isn’t. I’ll need the price to rise by 1.74% by 16OCT2020 (68 days in force) to realize the full profit. I bought the 85/87.5 spread with the spot price at $86.00. I got 1.30 pricing per share on 9 spreads, putting 1,170 capital at risk. Should I reach my price target, the full profit of 1,080 will be earned for a 92% return or 1,087% annualized. With a nice uptrend in place on the charts, I like my chances.
Devour your prey raptors!