I'm Getting PAID to Buy SpaceX Stock Right Now

[00:00:00]Hello traders, Steve Gans here. Like everyone else in the world, I've been watching SpaceX over the past few days.

[00:00:08]SpaceX opened IPO here. I've got this set on hourly bar chart. Made a big run-up here up to 224.

[00:00:18]And has since dropped back considerably.

[00:00:20]Now, that's not uncommon for IPOs. So, the question is the low or the opening point here around 150 or so going to hold for SpaceX. And if it does, might I want to own some there? So, the answer is yes, maybe. I'm going to share this example. This is not a trade recommendation.

[00:00:45]This is an overall lesson or education on how to potentially enter a position if you're wanting to and to get paid to put that order out there. So, how does this work? The process is called a cash-secured put. So, what I do in this case is I decide first of all, what would I be comfortable with from an entry price. We were a low here of right around I believe this was 150 on the open. I'd be comfortable owning in that 145 150 range, somewhere in there.

[00:01:21]So, if that's my assumption, how would I go about doing that? I come out to write a cash-secured put. And I go out, I choose my time. I'm going to go out about a month here. So, I'll go out to July 17th, which is 29 days as we can see right here. SpaceX is currently trading at 180.

[00:01:42]As I said, I'd be okay maybe owning in that 150 145 range. So, if I wanted to sell a cash-secured put at a price around there, let's just go to 150.

[00:01:58]I can pick up $535 instantly by going ahead and placing that order for that cash secured put.

[00:02:08]So, what does that mean? If we look at this risk graph, that means that if at expiration here on July 17th, if we get to that expiration date and SpaceX is above 150, I just get to keep that $535 and I get to go do this whole thing all over again. So, if SpaceX rallies from where it is now, if SpaceX stays above that point, that's a good win for me. I can just pick a new price, write that put all over again. Now, what if SpaceX pulls back? What if it pulls back down here to 150? If it Well, let's make it 149.99.

[00:02:53]So, if it drops to 149.99 and is below that price on July 17th, I will get 100 shares assigned to me. I have to have that money set aside to buy those if I'm going to carry this position to expiration. But again, that's my thought process when I decided that I'd like to own some. If I wanted to own some at around that $150, this is a way to get paid to do it. But I am going to have to have that $15,000 to buy those to buy those 100 shares if they do get put to me. So, that has to be set aside in my account. Now, what is my max potential loss here? If SpaceX went to zero, which I don't see happening, my max loss would be the $15,000 that I paid for that stock if it got put to me, minus the amount of credit that I'm going to take in on this put.

[00:03:55]So, my max loss would be 14465.

[00:03:58]It would actually be less than if I just outright bought the stock at 150.

[00:04:03]Now, what's more likely to happen? Even if SpaceX does come down to this point and it doesn't go below 150, again, I just get to keep that $540.

[00:04:16]But, even if I were to get assigned, the break-even on this is all the way down here. My break-even is down around that 145 point. Why is it down at 145? It's down at 145 because I'm going to have to pay 150 to get into that position if SpaceX drops below 150. But, I got $540 in premium that kind of offsets that. And of course, that $540, that's $5.40 per share. So, that would mean that my actual entry price, if I got it assigned to me, would actually be down there around that 145.

[00:04:58]That also would then be my break-even for the reasons I just explained.

[00:05:03]So, if I were comfortable with this and it's okay, yeah, I'd be fine owning SpaceX at 145.

[00:05:10]I'm going to go ahead and save this trade. I'll share it in the link down below. And you should go in and open this thing up yourself, play with it a little bit, try moving that slider around. Go in see see what would happen if I wanted to be more aggressive. Maybe I wanted to sell something almost at the money here. What would that look like?

[00:05:35]And you could slide your short that you're going to sell, slide it up to 180. See if you slide it up to 180, you're going to get almost $1,800.

[00:05:44]So, go ahead and play with this thing.

[00:05:46]Slide it around a little bit. See what the different pros and cons are of taking on a position at a different location. And then just watch as this plays out over the coming days.

[00:05:58]So, that's it for now. I'll come back and check in on this a little bit later and update everyone. But for right now, copy that link that's in the description down below. You do not have to have an account here at Option Strat. It will just automatically open on a page for you. Then if you want to establish a free account, you can do But I'm also going to urge you to use the link down below if you'd like, and you can go ahead and set up a free account. That'll give you a few more benefits along the way as well. That's it for now, everyone. Take care.