We all are told as traders that 2 years is too long a window for a strangle. Here is a different way to approach a strangle as an investor/trader.
First do the due diligence and decisde this is a company you would own all of at the prices that it could be put to me.
This is a great company pushing all the right buttons.
The strategy:
I sold the $42 call and the $12 strike put for January 2024.
I collected roughly $6.
Note that the stock will have to be above $48 and below $6 to cause any pain. For those new to the concept, I keep the cash and I invest the entire proceeds plus my cash into my favorite monthly trade at this time GGN. GGN trades down after the dividend ex date and up the last week into the next monthly distributioin date. Gaming the common is not difficult and represents a 10% annual distribution on the $42 I invest in GGN.
Since I will gain $4.20 the first year, I look to game the GGN and leave the strangle alone as a position that I would be happy to own for nearly nothing within the $42/$12 channel.
I will again roll this position when new father out leaps are available.
A theta strategy for investors who will roll and trade the position when opportunity presents itself.
This is an evaluation I always make. Where was CLF two years ago? Why? Why is it different now? What is the trend? what narrative makes the most sense? How do I establish extremes outside the current market prices and implied volatilitites?
Collecting $6 after the last roll ( see my former CLF posts) my net cost is below $6 and above $48. How do I lose here with GGN earning 10% after reinvestment on the total $42 I put in GGN? I could have gold and oil decline and get caught long GGN as it approaches ex dividend monthly. I also could gain nearly $1 per share as GGN spiked when the Iranian General crisis destablized the Middle East over a weekend.
time decay working in my favor.
Risk is the restless soul of the market - a Mandelbrot quote I like very much.
Collecting $6 after the last roll ( see my former CLF posts) my net cost is below $6 and above $48. How do I lose here with GGN earning 10% after reinvestment on the total $42 I put in GGN? I could have gold and oil decline and get caught long GGN as it approaches ex dividend monthly. I also could gain nearly $1 per share as GGN spiked when the Iranian General crisis destablized the Middle East over a weekend.
time decay working in my favor.
Risk is the restless soul of the market - a Mandelbrot quote I like very much.
all the best