Expensive Option Strategies (Preview)

By Lawrence G. McMillan

Normally, we have “Naked Put Writes” in this section of the newsletter. But with the explosion in implied volatility and stock price in several “short squeeze” stocks (or “meme stocks,” if you prefer: a meme stock is any publicly traded company that is benefitting from the fact that investors are using social media to drive interest in the company's shares).

The following table shows the current status of the most expensive of these in terms of implied volatility:

The first four are the ones that have gotten most of the publicity this week. SFIX is reporting earnings next week, so we should probably avoid that one in terms of naked put selling or other “non-earnings” strategies. But the others all have merit as aggressive trades.

As a brief refresher, it might be good to go over the pattern that a short squeeze takes in a stock: it first explodes to the upside...

Read the full article, published on 6/4/2021, by subscribing to The Option Strategist Newsletter now. Existing subscribers can access the article here.