‘Painful Losses’ in Meme Stocks

Scott Bauer, CEO of Prosper Trading Academy
@cboesib @ProsperTrading

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Time for the final trade of the day. Several stocks in the market are making moves, and it looks suspiciously as though maybe the main Reddit traders are back in play. Here’s what you need to know in our final trade of the day. This is Skype, our Prosper Trading Academy Tupperware rite Aid, yellow. They’re all trading reminiscent of the meme craze.
But I’m going to focus on yellow. And the move recently extends a stretch of volatile trading that followed the company’s decision to shut down operations ahead of an expected bankruptcy filing. And most of the option volume we’re seeing and it’s very heavy, is centered on the short term. The next few weeks. But options are listed all the way out to June of next year, for example, in yellow.
Two weeks to go until August expiration, the stock’s traded about $4. The $4 straddle or adding together the call and the put together that’s trading for over $2. That’s 50% of the stock price trading here is a complete gamble. Many traders want that. I stay away from it. A warning for anyone thinking of jumping into the fray. The wild ride for meme stocks.
There’s been some painful losses and you know just recently look at people trading in Bed, Bath and Beyond. That thing went to zero. Now, if were on the short side of that, okay. But my advice would be, if you’re going to do something in a stock like this, do not do not have a naked call option position because you would have unlimited risk to the upside, at least if you sell a put in your naked a put option.
The most you can lose is it the stock goes down to zero. This is Scott Bauer with Prosper Trading Academy. Go to business first and dot com for where to see our show on TV.

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