Introduction:
Walgreens is one of the largest drugstore chains in the world, headquartered in the United States. The company has recorded steady growth in recent years, thanks to its market-leading position and its international expansion strategy.
The trade:
I opened a bull put selling trade. This trade consists of selling a put with a strike price below the market price of the shares, and buying a put with a strike price even lower.
I structured the trade as follows:
Selling a put with a strike price of $22.50 and expiration date February 16, 2024.
Buying a put with a strike price of $20 and expiration date February 16, 2024. T
Profit and loss:
The profit of the trade is realized if the price of Walgreens shares is above $22.50 at the expiration of the options.
The maximum loss without a stop loss is equal to the margin required by the broker and is realized if the price of Walgreens shares is below $22.50 at the expiration of the options.
Stop loss:
To limit risk, I set a stop loss at 3 times the premium of the options, which, with a 75% profitable trading history, is adequate.
Conclusion:
The annual ROI of the trade is 203%. The trade itself can be closed before expiration if prices move favorably, allowing for closure with a reduced fraction of the premium but with less time in order for the annual ROI to be higher.