URA a leap option strangle
Updated
This is a common sense risk reward play using an option strangle strategy that is takes advantage of time decay (theta).
Sell the $42 strike January 2024 call and sell the $12 January 2024 put.
Collect $7.00.
This ETF has adequate size (nearly $1 billion) and been in business long enough to support the idea that it will be around and that the managers have a handle on the process.
The main compnent is a 24% +/- position in Australian uranium company, CCJ.
The question to ask is a simple one. After collecting $7 what is the possibility that I will own URA at $5 or have it taken from me at over $49 when including the premium collected?
The premise is logical in that the range is extremely wide and the premium adequate at the ITM and deltas of these options.
Therefore I should have time decay work in my favor if the ETF stays in this range. I should be able to roll the option forward in six months and likely collect roughly 20% of the decay as cash when rolling the options out an additional sixth months.
I wrote a piece on the idea that I place the entire sum at risk - $49 - in GGN and trade it intothe distribution every month. My goal is to make over the monthly 3 cent per share (nearly 10%) annual dividend, further reducing the cost of the ETF if put to me on either end.
This seems a reasonable risk/ reward. URA would have to be at a new all time low if put to me or far above an all time high if taken.
I like my chances.
all the best
Sell the $42 strike January 2024 call and sell the $12 January 2024 put.
Collect $7.00.
This ETF has adequate size (nearly $1 billion) and been in business long enough to support the idea that it will be around and that the managers have a handle on the process.
The main compnent is a 24% +/- position in Australian uranium company, CCJ.
The question to ask is a simple one. After collecting $7 what is the possibility that I will own URA at $5 or have it taken from me at over $49 when including the premium collected?
The premise is logical in that the range is extremely wide and the premium adequate at the ITM and deltas of these options.
Therefore I should have time decay work in my favor if the ETF stays in this range. I should be able to roll the option forward in six months and likely collect roughly 20% of the decay as cash when rolling the options out an additional sixth months.
I wrote a piece on the idea that I place the entire sum at risk - $49 - in GGN and trade it intothe distribution every month. My goal is to make over the monthly 3 cent per share (nearly 10%) annual dividend, further reducing the cost of the ETF if put to me on either end.
This seems a reasonable risk/ reward. URA would have to be at a new all time low if put to me or far above an all time high if taken.
I like my chances.
all the best
Note
"The Daily Shot" this morning had a chart showing $750 million venture capital invested in uranium assets. 2% of portfolio assets invested here. all the best
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