- Underlying: ULTA
- View: Bullish, but expecting near-term consolidation/slight pullback before resuming uptrend. Aiming to generate income from the bullish bias and elevated IV.
- Strategy Type: Credit Spread / Defined Risk
- Option Contract Portfolio:
- Sell 1 ULTA Put @ $560 Strike (Exp: 2026-05-01)
- Buy 1 ULTA Put @ $550 Strike (Exp: 2026-05-01)
- Max Gain & Loss: Max Gain = Net Credit Received ($2.10); Max Loss = ($10.00 - $2.10) = $7.90 per spread.
- Initial Cost/Credit: Initial Credit of ~$2.10 (using mid-prices: Sell $560 Put @ ~$7.75, Buy $550 Put @ ~$5.65).
- Greek Exposure (Simulated):
- Delta: ~+0.32 (Positive, bullish directional exposure)
- Theta: ~+0.06 (Positive, benefits from time decay)
- Vega: ~-0.06 (Negative, benefits if IV decreases post-consolidation)
- Gamma: ~-0.001 (Low sensitivity to large price moves)
- Rho: ~-0.01 (Low interest rate sensitivity)
- Rationale: This strategy aligns with a bullish but cautious view. Selling the $560 Put collects premium due to elevated IV. The $550 Put purchase defines risk and provides a buffer down to $560. The position profits if ULTA stays above $560 by expiration (breakeven at $557.90), allowing for some consolidation or a minor pullback from the current $572 level. Positive Theta is harvested daily, and negative Vega benefits if the overbought condition leads to lower volatility as the stock consolidates.
- Time Frame: Short-Term (10 days to expiration).
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