Yesterday after the close DDD announced it would be selling nearly 6 million shares in a secondary offering. As expected, the street didn't like that news one bit!
So today the stock gapped down nearly 7% - and I think we got quite a bit more downside to come. This is VERY frustrating for me as my DDD shares had finally gotten out of the red! So whatever short squeeze or momentum we had to the upside is gone, see ya, BYE!
That's why I sold to open a call against my 100 shares. I then used those proceeds to buy to open a put. Specifically I sold the $55 June 27 weekly expiring 30 days from now, and bought the closer dated June $50 put. I made $192 on the call and spent $180 in the put for a net credit of $12. But obviously I'm not playing this to simply keep the credit. Since I believe we are definitely headed back to the $40's, my goal is to buy to close the call for MUCH less than I sold it for, and then to turn around and sell to close the put for MUCH more than I paid. Overall, netting a nice little profit!
Now, what happens if I'm wrong and DDD somehow moves up over the next month. Well, I'll keep the $12 and sell my shares right at what I paid for them. So in essence I'd break even! So I've got a lot of upside, and absolutely ZERO downside.
That's my kind of trade right there people!!