This week’s bear spread is in PG.
music selection: “I Will Remember” — Queensryche
weigh-in: 219.8 (0.6)
Procter & Gamble (PG) is a consumer goods company and dividend aristocrat. It has raised distributions for 57 consecutive years. It is a mature, slow moving company that is well suited to in the money spreads. I like the technical chart for a bear spread here. The stock has been in a downtrend since 9NOV2020 and the RSI is a little over 25, still not in “oversold” territory. All indications are the downtrend should continue.
I bought the 140/145 bear put spread with 19MAR2021 expiry for 4.50 a share. I have 8 spreads putting 3,600 dollars of capital at risk in the trade. With shares trading at 130.55, I have 7.24% downside protection against a rally in price. The trade will be in force for about 54 days and should downside protection not be breached, will be worth 5.00 a share at expiry. That would be good for 400 dollars in profit or 11% on capital at risk which is 75% annualized.
I now have 8 spreads active. Seven are well in the money while LNG is threatened, with the high strike 3.31% out of the money. If LNG were to expire today, I would still earn 22% on my capital at risk thanks to a very attractive entry price. I will be monitoring that one closely. The remaining trades look to deliver over 14,000 in profit by March 19.
Devour your prey raptors!