Any short trade you want to really understand your strategy ahead of time. On many platforms retail investors can execute a straight short.
That aside, you can look to the options market. Buying a put caps your losses, but pricing is high (thanks to elevated volatility) and liquidity isn't great.
That's less of a problem for a smaller-dollar account, though it does mean you'll pay in spread to execute the trade and pay again if you want to close it out at whatever point. A straight put does require a reasonable move: at September, for instance, you need the stock to drop 8% or so in two and a half months to make any profit.
I don't hate the idea of a spread here, perhaps at the money. If you keep the expiries relatively short (say, the September expiration) you can get decent returns on an at-the-money spread — essentially a bet that the stock is lower at expiration than it trades right now.
But, again, spreads and liquidity are a problem: a look at the chain suggests it's probably tough to get 100% return on the September 75/80 bear call spread (sell 75, buy 80 to hedge), which in theory you should be able to receive with the stock at $75.29.
For me, personally, a straight short is probably how I would play it. There are plenty of shares and the borrow rate is minimal (sub-1%). Beyond that...it's really a matter of conviction and what your own due diligence tells you. If you think this market is staying down and bringing TXRH with it, the spread costs are probably worth it. If you think there's a world where the stock catches up with the market and busts through support around $70, then you can perhaps have some confidence in buying a put.
Hi vince! I learn a lot from your writings, i really appreciate your work. The Execution of that for retail investors is by buying a put? Thanks!
Hi Adrian,
Any short trade you want to really understand your strategy ahead of time. On many platforms retail investors can execute a straight short.
That aside, you can look to the options market. Buying a put caps your losses, but pricing is high (thanks to elevated volatility) and liquidity isn't great.
That's less of a problem for a smaller-dollar account, though it does mean you'll pay in spread to execute the trade and pay again if you want to close it out at whatever point. A straight put does require a reasonable move: at September, for instance, you need the stock to drop 8% or so in two and a half months to make any profit.
I don't hate the idea of a spread here, perhaps at the money. If you keep the expiries relatively short (say, the September expiration) you can get decent returns on an at-the-money spread — essentially a bet that the stock is lower at expiration than it trades right now.
But, again, spreads and liquidity are a problem: a look at the chain suggests it's probably tough to get 100% return on the September 75/80 bear call spread (sell 75, buy 80 to hedge), which in theory you should be able to receive with the stock at $75.29.
For me, personally, a straight short is probably how I would play it. There are plenty of shares and the borrow rate is minimal (sub-1%). Beyond that...it's really a matter of conviction and what your own due diligence tells you. If you think this market is staying down and bringing TXRH with it, the spread costs are probably worth it. If you think there's a world where the stock catches up with the market and busts through support around $70, then you can perhaps have some confidence in buying a put.
Awesome, great! Everything instructional 🙏