Pandora has taken a beating even with it's new Sirius backer.....because of the use of convertibles to finance other projects (share dilution). I see P has touched this support level several times and also has a gap to fill that may/may not match 1.618 extension. I couldn't care less about that (think tool was fib retracement) and want to start to own these shares for free via cost basis reduction. Like all my other trades I am hiding in small UL with a better risk/reward because I am having difficulty getting long at these heights. I sold two puts @ 8 strike out til Sept. for $1.28 each and purchased a call @ 7 strike out til Jan. for $1.19 for a risk reversal type trade but with even more deltas since the puts are ITM.....also call ITM (for now) to help reduce theta decay. Implied volatility was not very good and this is not the typical Tasty Trade style but times are hard for premium sellers right now. Hope it works out
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So Pandora has been bouncing back a little here and I closed this trade out today for a little over 20% gain in both calls and puts....I normally manage at 50% but since this happened in about a week (short time frame) I decided to take this off and look for another opportunity to reestablish a position with better implied volatility. I am not sure the selling is over in this name or the overall market for that matter.
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I have decided to make my Roth delta positive and am still bullish in P as I think it has as much to offer as Spotify or any other streaming service with a bit of a headstart. I am going to use the earnings announcement and the higher implied volatility rank as a way to get long P stock. I am going with the synthetic covered strangle again but a bit more directional. I am going to sell (write) 1 put at the 9 strike and 1 put at the 12 strike for 3.00. This does not have much extrinsic value and is almost just like buying 200 shares but with the ability to roll when wrong. There is a 60% probability of profit and 2100 buying power reduction (cash secured) The float is currently 194M with 39% short (94.5M) but the shares outstanding 242M must reflect the share dilution for the Jana Partners stake that recently made the stock plunge. I am intrigued by the unusual high volume at the 12 stike in the August monthly expiration and am hoping this will be a magnet that draws price to it........if I am wrong and we revisit 7 I am ok with that but *IF* I am right and the stock pops I will get 14% roc in 20 days. I will place this trade Monday 7/31 and hope price does not vary much.
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Well I don't know what happened......there is 0 volume at the 12 strike and it is trading for less than intrinsic value this morning. The stock is down 5% (50 cent) this morning and earnings are today after the bell. I decided to sell 2 puts at the 9 strike for .61 cents each in the August monthly expiration instead. POP is 61% and I want to buy a call but will stay conservative since this is a Roth and not a trading account.
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Closed this trade today for .48 cents......not even 25 bucks after costs. Disappointed this did not work out as good as I had hoped. Assignment fees of 5 per contract and just hoping to get some more volatility to help me initiate a position were the factors I considered. Locked in a small win/scratch. I was thinking of being more aggressive and writing a covered straddle at the 8 strike once I was assigned and holding 1 lot for maybe a call ratio with the other. Being in cash and not exposed to markets (except during/after volatility events) has worked well in the past so I will wait.
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Changed accounts and placed this one in reg-T. Sold 2 puts at the 8 strike out til December for .77 each and since this is my trading account the plan is not to take the stock, so I will roll if tested and even add a call component but probably not until the 21 DTE or when November options are added. Volatility was pretty low but overall market volatility is rising. I will add to this trade in the Roth if Pandora continues down to 8 or below, or look to manage at 50% if it bounces.
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Now in the Roth. Was going to ladder puts but Pandora does not seem to want to drop to 7...? I see the market makers do not think there is any upside potential. I sold 2 more puts @ 8 strike and purchased 9 calls out to January 18 and still collected 33 cents. 84 cents premium is over 10% of the stock price, so I will continue with this contrarian trade but super small.
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With earnings on Nov. 2nd I decided to hedge this trade some by buying PDS. (put debit spreads in the Nov. monthly options 7/6 for .26 each. It seems this name keeps drifting down and I will probably even sell them before earnings if they reach 50%. as I remain somewhat bullish but market is telling me I shouldn't be.
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Closed the hedge (put debit spreads) this morning now that Pandora has disappointed on earnings for .85 cents (.59 profit....if you want to call it that) and also rolled out the short puts all the way to June 18 for .23 cent credit. Have this trade in several different account so hard to say what my basis is but needless to say I am very unhappy as this had been one of the stocks I had traded most successfully this year......until now. If premium dries up and the stock just sits there it will become almost impossible to do anything else with it from this point on.