NEW YORK (TheStreet) -- Strategic Mindset: Our Strategic Mindset at Top Gun Options changed two weeks ago from market neutral with a bearish bias to bearish.
Green Mountain Coffee Roasters
trading at $23.54.
: After an earnings report that knocked GMCR out of the stratosphere early in May, we entered a Bull Put Spread, selling 35 of the 25/22. We held this position until Friday expiration and exited for a nice profit as the stock wanted to pin at $25 but fell shy.
We still believe that GMCR has found "new support" around these levels and the disparity between historic and implied volatility sets up another opportunity to sell a credit spread and potentially profit.
Charts compliments of www.trademonster.com/tgo
: Sell 20 Jun 22/19 Bull Put Spread for a credit of .71
- Sell to open 20 Jun 22 Puts for 1.00
- Buy to open 20 19 Puts for .29
- Net credit of .71
- Max Gain: $1420, 64% probability of retaining max profit
- Max Loss: $4580, 12% probability of sustaining max loss. According to Top Gun Options trading ROE (Rules of Engagement) we will not risk more than 5% of the model portfolio on any one trade.
: We will let this trade fly down range unless we see a significant shift in market sentiment. We're seeing a relief rally today and believe the market is oversold and will trade sideways with the seasonal summer selloff and the problems overseas.
: We will close this position if we lose more than 50% of our credit. As always at Top Gun Options, we close the position whenever the Commit Criteria change.
GMCR isn't going out of business anytime soon, and we feel the earnings report provided an excuse to take profits on the overcaffeinated stock. We plan to take advantage of this move and the increased volatility to potentially profit.
Matthew "Whiz" Buckley is the Founder and CEO of
an exclusive provider of options training and practical trading applications for options traders of all skill levels. He is also the founder of Strike Fighter Financial LLC, a business-consulting firm specializing in leadership development, risk management and strategic planning for Fortune 500 companies and related organizations. He�s also a Managing Partner and Chief Financial Strategist at
Buckley flew the F/A-18 Hornet for the U.S. Navy. He's a graduate of TOPGUN, has close to 400 carrier landings and flew 44 combat sorties over southern Iraq. After leaving active duty, he served as a Managing Director at a Wall Street volatility arbitrage options firm and was a founder and the CEO of a financial media company. He is an
and combined his experiences in the military and corporate America in his first book "From Sea Level to C Level."