After making 187% profit and closing the position on Wednesday, I think its time to get back in. LPX is trading down about 3.5% this morning and less than 15 minutes ago a large trader stepped in and bought 5000 contracts in a single lot of May $10 calls on the offer at $0.20. Open interest is 1004. This is a cheap shot to the upside with earnings expected on May 4.
Shares continue to trade cheap here at 2.5x cash and 0.8x book value. I think $10 is too far out. I like the following in-the-money bull put spread:
- Buy to open May $7.5 puts - Sell to open May $10 puts
I just filled the order for net credit of $1.50. The break even is $8.50 and provides 150% return if the stock is above $10 by May expiration.
Technically, the stock continues to trade along the rising support line that has been in place since July 2009. I expect the stock to find first support at $8 which was previous 52-week high. On further sell-off, the stock could retrace to $7.70 rising support. I like the odds.
I have Masters in Business (Accounting and Finance 2003) from Michigan State University. I have been trading the market since 1998. Prior to picking up trading as a full-time career in 2008, I was a management consultant at Alvarez & Marsal and Conway MacKenzie for four years. I provided turnaround, crisis management and restructuring services to financially distressed firms. Prior to working in turnaround, I worked in Audit & Assurance at Deloitte & Touche for two years. Trading in the market has always remained my side business ever since I started college. 90% of the time, I trade through options. I love volatility skews and positive Theta plays. While I make a lot of directional bets, in general my favorites are to take advantage of high implied volatilities through calendar or butterfly spreads and vertical credit spreads. I never buy straight calls or puts and I do a lot of exotic multi-leg option trades.
Shares continue to trade cheap here at 2.5x cash and 0.8x book value. I think $10 is too far out. I like the following in-the-money bull put spread:
