Playing Stocks Bearishly With Puts

On Tuesday I showed you the Unusually High Call Option list from my Morning Report in the TG Suite app.

We looked at stocks attracting attention from traders who felt the shares would do well, should the markets recover even a little from Monday’s big sell-off (or, in the case of one stock, should the company enjoy a fat buyout bid).

Stocks continued their sell-off yesterday, though it wasn’t as dramatic as Monday… Still, against this backdrop, I wanted to highlight some names attracting BEARISH betting in the options world.

The stocks on this morning’s Power Profit Trader Watchlist are brought to you by the Morning Report’s Unusually High Put Volume list, indicating traders are expecting a slide in these securities.

We’ll dive into that Watchlist and I’ll explain more about put buying today!

Each day, we’ll show you an interesting situation from one of the Morning Report tools from the TG Suite app.

There may or may not be a trade idea that goes with the education, but we will show you the situation from one of our scans each day that is deemed worthy to talk about, and you can decide from there if you want to act.

We may use the same Morning Report tool for more than one day in a row, if the situation warrants it. We will also try to mix it up regularly, so you get a well-rounded eye on the various scenarios we see.

Today, I am highlighting the Unusually High Put Option Volume list in your Power Profit Trades Watchlist.

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At the top of our list is once again Tesla (TSLA)– specifically, the TSLA December $750-strike puts.

You can see in the image above, the option contract is written as YYMMDD to indicate the expiration date, then C for Call or P for Put, followed by the Strike.

By purchasing these puts to open, the buyers are expecting TSLA shares to sink further beneath the round $750 level before the options expire on Friday, Dec. 17.

If the buyers paid $69.80 for the puts (under the Price column in the image above), that’s the most they stand to lose, should TSLA shares skyrocket above $750 through options expiration.

On the flip side, the further the stock sinks beneath that put strike before the options expire, the more the put buyer stands to gain.

TSLA daily chart with 50-day and 200-day SMAs

The stock closed yesterday at $739.38, meaning those $750-strike puts are already in the money (ITM).

Put options are considered ITM if the underlying shares are beneath the strike price, while call options are ITM if the shares are above the strike price.

The deeper the option goes ITM before expiration, the better for the buyer.

Talk again soon!

Tom Gentile
America’s #1 Pattern Trader, Power Profit Trades

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