Descending Triangle Setup on UAL
Airline fundamentals are horrible for the rest of 2020, with earnings expected to go DEEP negative (we're talking potential bankruptcy level negative).
50MA and 100MA well below 200MA.
Descending triangle pattern offers well defined stop level.
Few ways I'm considering to play this position:
|Chicken Short| [more of a thought exercise]
Short 100 shares, buy 25 CALL expiring Sep. 18, 2020
- BP reduced by ~ $1740
- Defined risk, negative theta
- initial delta between -35 to -50 (more initial directional risk)
- can leg out of call or buyback shares to adjust position
|Partially Covered Call| [preferred method]
Buy 40 shares @ 24.00, short 26 CALL expiring Sep. 18, 2020
- BP reduced by ~ $1200
- Undefined risk, delta capped at -60, positive theta
- initial delta between -12 to -20 (less initial directional risk)
- can buy/sell shares and roll call out in time to adjust position
With a stop at 26.50 price level, the total risk should be somewhere between $40 - $300 depending on which strategy is used and when the stop triggers.
TP aimed around 17.10 price level.
50MA and 100MA well below 200MA.
Descending triangle pattern offers well defined stop level.
Few ways I'm considering to play this position:
|Chicken Short| [more of a thought exercise]
Short 100 shares, buy 25 CALL expiring Sep. 18, 2020
- BP reduced by ~ $1740
- Defined risk, negative theta
- initial delta between -35 to -50 (more initial directional risk)
- can leg out of call or buyback shares to adjust position
|Partially Covered Call| [preferred method]
Buy 40 shares @ 24.00, short 26 CALL expiring Sep. 18, 2020
- BP reduced by ~ $1200
- Undefined risk, delta capped at -60, positive theta
- initial delta between -12 to -20 (less initial directional risk)
- can buy/sell shares and roll call out in time to adjust position
With a stop at 26.50 price level, the total risk should be somewhere between $40 - $300 depending on which strategy is used and when the stop triggers.
TP aimed around 17.10 price level.
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