This post has been made public after the trade was closed and is no longer active. All information shared is for educational purposes only and does not constitute financial advice.
As long as the pattern in today's trade holds up high, then we can profit in today's trade.
If it follows through on the upside, all the better and we'll achieve our profit target all the sooner. But as long as it doesn't falter, that's all we need to profit.
Either way, we're leveraging what the options market is offering us to increase our odds of success.
Here's a one-year chart of YPF Sociedad Anonima $YPF:
This is a $17B integrated oil & gas company from Argentina.
YPF recently completed a structural trend reversal on both absolute and relative basis.
Price is pressing against a critical resistance level at the 2014 cycle highs.
While some consolidation is more than welcome at current levels, if and when we get a decisive resolution above 41.50, the path of least resistance will continue higher.
On relative terms, YPF has been outperforming the broader market since 2022.
We're buying YPF on strength above 41.50, with an initial target of 65.75 coming 2-4 months.
Consolidation? No problem.
High implied volatility in the options is offering us higher than average odds to earn profits from selling premium:
So we're going to put on a bullish credit spread that pays us to wait for the breakout that may or may not ever come.
Here's the Play:
I like selling a $YPF April 37/32 Bull Put Spread for an approximately $1.40 net credit. This means I'll be selling the April 37 puts and purchasing an equal amount of the April 32 puts to define my risk:
The most I can lose is $3.60 per one-lot ($360), so I'll size my position according to that math (I don't want the risk to equal more than 1-2% of my portfolio equity).
As long as $YPF can stay above my short strike ($37 per share), I'll keep this position working for me. If we see a closing price for $YPF below 37, that will be my signal to exit the trade to protect against any losses. Depending on the timing of this exit, we might still profit!
Meanwhile, I'll leave a good 'til canceled (GTC) limit order to close this spread for a profit at a 50 cents debit. That would mean I've captured better than 64% of the premium I collect today. Take the profit and move on.
