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Home >> Stock Forums >> Bull put spread on GENZ?

Bull put spread on GENZ?

MSCantrell said: "(Dr. Dan, you out there?) :) I've been trying to find my own trades, rather than rely on recommendations... so let me ask the group, what do you all think of this: too small of a reward for the risk? Sell July 55/60 put spread on GENZ, for a $.75 credit. Breakeven at 59.20 Profit of $.75 above 60 Loss of $4.20 below 55 That's 17% in 58 days (too long?), in terms of max-reward over max-risk. GENZ is on the way back down after some good news in April, but it looks to have good strong resistance around 59-60. Would you do it, or keep looking for something better? Having followed the recommendations around here (and your site, Doc) for a while, I know it doesn't look as good as most of them. If you wouldn't do this, what exactly would turn you off? Thanks mucho! Mike [i]Edit: Forgot to add, how problematic is it that this flies in the face of BOTH "Sell in May and go away" AND the downward trend of the stock?[/i]"

drdan said: "17% in 58 days is OK. You can do better so I would look for better.For percentage gains between 10 and 20% I like to be in a trade only 4 to 6 weeks - 8 weeks is pushing it a little. BUT that is not the reason to stay away from this trade. Here are my reasons for not doing a trade like this right now. You do have a channelling stock with a support at 59.50 so even though there is a bear trend on this stock it would be OK to trade a Bull Put Spread. I just like for beginners to go with the trend. The problem with your sold strike being at 60 is that you are already behind and at a loss if the stock breaks support. I like to place my spreads one strike price below support so if support is broken I can try and get out of the trade without losing everything. I also like to try and have my sold strike so that the stock has to move at least 10% to hit it. Yours only has to move $2.00 thats only 3% which can be done in one or two days! Thats a lot of worry for the next two months! And last is merely a speculation point but we are all waiting for a strong pullback in the markets and even though you have strong support at 59.50 if the pullback is as strong as predicted the stock will blow right through that support. Two other items that may help you in trading - you can use Holzie's method of two standard deviations away is where you place your sold option (using think or swim platform helps with this) OR you can use what I use - a probability calculator and make sure your trade is at least an 80% win."

MSCantrell said: "You're the [SIZE="4"]MAN[/SIZE]. That makes lots of sense. I appreciate it! Back to the drawing board, hunting for bear spreads instead. :) Mike"