Back on October 9th, we focused here on Long Squeezes which is a stock that is moving lower and there are not many shorts. Recently, Long Squeezes have been dropping week after week. So a bounce was in order.
Took a month to happen but it finally happened this week. Here is the chartof Goldman Sachs on October 9th which was a bounce candidate.
Our favorite bounce candidate was Goldman Sachs (GS) as it was a Long Squeeze and had excessive put action as the Erlanger Option Rank was at 90%. Therefore, Goldman Sachs we thought could be a Put Squeeze which happens after a stock has dropped and the put action remains too heavy. Here is that chart from October 9th.
We recommended that you could buy the November $310 Call for $14.01. So the cost of this is $1401 against buying 100 shares for $31000. An even better play would be to buy the November $310 Call for $14.01 and sell the $325 Call for $6.55. The cost drops to $7.46 or $746. So how has this turned out?
The stock price has gone from $312.48 to $324.71. We will stay long the stock. The options are another deal. The November $310 Call is at $16 for a gain of $1.99 which we will close for a gain of 14.20%. The spread of buying the November $410 Call and selling the $325 Call is at $16.00 for the $310 Call against $5.40 for a value of $10.60 which is a gain of $3.14 or a gain of 42.10%.
To reiterate, stay long the stock and sell these option positions.