Good morning,
DWAC is likely to collapse now that Iowa and New Hampshire elections are over.
But getting short isn’t easy because it’s a hard to borrow stock with expensive fees.
It’s a juicy short though because reversion to the mean puts it in the middle $20’s.
Now that it’s breaking down, -15% already Wednesday, it makes sense to watch bearish exposure.
I know what you’re thinking, buy puts!
I get it, but the IV (implied volatility) is over 300% so buying puts are very expensive.
Here’s the best way to short DWAC, with defined risk, as far as I’m concerned.
Its focus is selling options through risk defined spreads.
DWAC is option-able.
So I did what’s known as a bear call.
You might hear it called a short call vertical spread.
I alerted the trade yesterday (Tuesday) afternoon.
I sold the $50 call and I bought the $52 call for $.70.
And I can make 100% or $3,500 so long as the stock is trading BELOW $50 at expiry Friday February 2.
I’m currently up $1,300 or about 40%. My goal is 50-80% on this trade if all goes well.
So far so good.
What’s cool is this trade can be made with an account as small as $2,000.
And a trader doesn’t even need to use the full $2,000.
Try shorting a hard to borrow stock like this, you’d need a huge account.
And because I bought the $52 call above the $50 call I sold, it’s a defined risk trade.
Shorting stock has unlimited risk, I sleep better at night knowing my risk is defined at the onset of the trade.
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No hard to borrow stock with high fees
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No unlimited risk by shorting the stock
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No having to buy high IV puts
And still the potential to make 100% or $3,500 if the trade stays below $50.
These are the type of trades I make.
And it’s helped me grow the current $2,000 balance to $7,862.
Results aren’t typical. Trading is hard. Nothing is guaranteed.
I’d be happy to teach you this.
Jason Bond
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