The Cubes made strong headway last week toward a 312.29 target that we’ve leveraged with some Nov 20 305/310/315 call butterflies. We bought 16 of them for 0.10 before the election, and I advised subscribers to take profits on half when the price doubled days later. The spread subsequently traded for as much as 0.50, allowing more profit-taking at five times the original price. The spread can widen to 5.00 with the stock trading at 310 on November 20, which would imply a $500 payoff per, or 50-to-1. I would therefore suggest holding a couple of contracts until expiration, but feel free to take profits on the remaining six (or multiple thereof) at any time. Keep in mind that $5.00 ($500) is a theoretical maximum and that we would be doing well to exit for $350 or so — still not bad. That’s because the middle strike we are short would carry $1-$2 of risk premium even with the stock trading at exactly 310 seconds before the options expire. Their theoretical value would be zero, but traders would be willing to pay up for them to avoid the uncertainty of being assigned over the weekend. This is done by lottery, and it could leave one unexpectedly short $30,000 worth of stock on Monday for each option left uncovered. If you would like to learn more about butterfly spreading, go to your account page and check out the video recording I’ve prepared on the subject. _______ UPDATE (Nov 10, 7:20 p.m.): The likelihood of the 312.29 target being reached before our spreads expire diminished with today’s plunge, which created a bearish ‘island reversal’ on the daily chart. ______ UPDATE (Nov 11, 6:14 p.m.): Nice rally, but I’m not persuaded it’s capable of going much higher. We’ll give it the benefit of the doubt anyway, but watch for a possible rollover on the 15-minite chart if you’re keen to trade it.
QQQ – Nasdaq ETF (Last:289.84)