Today I’m working with a setup where the entry matters more to me than what the stock is doing on the surface today. The short-term chart is still soft, but price is getting close to an important longer-term support area, and that gives me the opportunity to structure a cash-secured put below the current market instead of needing an immediate rebound.
I also have more behind the trade than just the chart. The company’s latest quarter showed continued execution, including year-over-year revenue growth, a major new long-term commercial agreement, and progress expanding an existing customer relationship. That gives me more confidence being willing to own the shares if the market pushes them down to my level.
Technically, my strike is positioned below the 200-day moving average, with the breakeven sitting lower still. So even though momentum has weakened and the stock may need more time to settle, I have a meaningful cushion between today’s price and where assignment would put me.
This trade comes with a 62% Probability of Worthlessness (POW), meaning there’s a reasonable chance the option expires worthless and I keep the entire premium. It also carries a 70% Probability of Profit (POP), with my breakeven below the strike, meaning the stock can even trade below my strike at expiration and the position can still finish profitable.
I don’t need a big move higher for this one to work. I’m getting paid while the stock works through this area, and if I do end up owning shares at my adjusted cost basis, I’m comfortable moving directly into the covered call side of the Wheel.
Here’s how I plotted it out today.
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