Shorting Air BnB

An advanced-chat room denizen thinks shorting AirBnB (ABNB, currently $132), is a good way to leverage the coming collapse in residential real estate. I agree and am suggesting out-of-the-money put butterflys that expire in mid-November or later:

“I agree with your assessment of ABNB, John: It is dead meat. I suggest out-of-the-money put butterflies to play the stock’s coming collapse:  the 17 Nov 95/100/105 put ‘fly is currently quoted at 0.06/0.21.  You can move the strikes up or down by $10 to avoid bumping heads with other subscribers, and you can also try to leg it on — for free — as two vertical spreads. If you can get it on for a dime (0.10) or better, you’ll have a good shot at making 25-35 times your money. (The spread can go to $5 in theory, but in practice no one will be able to sell it for more than around $4.)”

The puts are not very liquid, so you should shop other strikes and expiration dates to avoid spooking the algorithms that will be selling you this spread.

Another way to play it would be to start with a calendar spread, ‘anchoring’ your position with, say the purchase of 17th Nov 100 puts for 0.75, and shorting 13^th Oct 100 puts for 0.10. When the latter fall to 0.02 or less, you would cover them and short 20^th Oct 100 puts. Rolling  the spread several times this way, week after week, can bring your cost basis down to zero or even a credit.  As the stock price drops, you’ll be collecting bigger and bigger premiums for the short-side puts.  The spread has the potential to trade for as much as around 2.30.

RA