Home › Forums › Closed Trades › Short Squeeze in SCTY
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July 18, 2016 at 7:52 am #6436Steven PlaceKeymaster
Setup: Breakout
Price: 25.25
Description:
We are towards the back end of the most recent market rally… this is a time when a lot of highly shorted garbage stocks start to run and squeeze higher. SCTY definiely has that setup.
Afteer an exhaustion gap down post earnings, the stock ran to 25.25 only to find sellers. It’s tested that area a couple times since May and it’s now ready to roll higher. First target is the declining 200 day moving average, second target is 35, price resistance from April.
On a breakout of 25.25… well if you wanted to get aggressive you just buy the Aug 25 calls.
For a spread, the Aug 25/28 bull call spread for around 0.95 is a good entry.
If the stock breaks out but then goes back under 23.25, then the trade is invalidated and you should stop out.
Earnings are next week so this will also have a time stop of 7/26/16
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You must be logged in to view attached files.July 18, 2016 at 9:37 am #6447Steven PlaceKeymasterI didn’t realize the options market for SCTY was so illiquid.
As it stands, the Aug 25 call has a spread of .40. That’s not acceptable. So instead of looking at options, your best bet is to just trade the underlying stock.
Here’s how to trade it:
Buy Limit 25.26
Stop 23.25
Sell half 29.97
July 26, 2016 at 11:43 am #6552Steven PlaceKeymasterOk so I’m going to do a call conversion here. I want to bet on further upside, but want to cut my risk into earnings.
With a basis of 25.26 and the current price of 27.27, the trade is up about 2.00 per share.
So here’s what I’m going to do:
Step 1: Sell the stock at 27.27
Step 2: Buy the Sep 28 call @1.20
The conversion is 1 call for every 100 shares of stock. So if you have 500 shares, you buy 5 calls.
This basically turns this into a “risk free” trade. It takes .80 off the table, and you participate in any further upside.
The bid/ask on these options are about 10 cents wide so I do think it’s fillable here.
September 2, 2016 at 11:50 am #6890Steven PlaceKeymasterSCTY is absolutely falling apart… it’s getting bought by TSLA, and TSLA isn’t doing well either.
I expect these calls to expire worthless.
Given the fact that this is a “call conversion” it has some profit locked in so even if the call expires worthless the total trade has already pulled in around .80 of profit.
September 23, 2016 at 10:45 am #7012Steven PlaceKeymasterCalls expired worthless.
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