Looking for an option trade? Try this one on Teledoc ($TDOC). (May 03, 2022)
TDOC COUP
I guess Cathie Wood, the greatest stock picker of all time, not, took a bunch of Teladoc ( NYSE: TDOC ) just before they reported earnings, after which the stock imploded. It opened 44 percent lower so that wasn’t really well but she did suggest that this is going to take over the world of their industry over the next 5-10 years. It’s nice when you are an “actively” traded fund when your performance is sucking, to talk about a 5-10 year performance. Go figure, I’m editorializing, completely editorializing.
Here’s what I wanted to talk about with Teladoc ( NYSE: TDOC ), the stock is moving up. Personally, I could be wrong and I don’t want to give anybody the vapors, but I think this move up is really more a function of being so darned oversold, more than 3 standard deviations below the mean here, which is the 20-day moving average, that it really had to come up.
The actual reason is not important. A couple of things, first of all, this reminds me of Coupa ( NASDAQ: COUP ). Remember in March here, the same kind of thing. It didn’t implode quite so bad but this stock fell, again, way outside the norm and reverted nicely. This thing ultimately went up over 70 percent and eclipsed the top of the gap.
Now, will Teladoc ( NYSE: TDOC ) do the same thing? Seriously, it might, it very well could, I don’t know. But this is what I think, I think you’ve actually got a pretty solid floor in at $30.00. If this was not here you would still see the stock in a pretty significant downtrend. No telling how long that would last, but it would still be in a pretty significant downtrend. But because this is down so low it virtually has to come up and at least test this channel. That is just the way stocks seem to trade. I am certainly not predicting that, I am just telling you, I have seen countless starts that have done just this very thing.
So the way I look at this is, that Teladoc ( NYSE: TDOC ) has still a way to go just to close some of the gap. And so that kind of leads me to a trade idea that I have, and it actually involves options. If you like this trade and you agree with me that hey, the bottom here is $30.00. I could even make a case for $35.00, then this is what you do, go out to the June option contract. June options, the $35.00 put, you can sell for $3.00. That means that if you sell a $35.00 put for $3.00 you actually get $300.00 for that and you are obligated to buy the stock at $35.00. So if the stock pulls back, sorry dude you own it at $35.00. But because you got $3.00 for that, your cost basis in the stock is actually down here. We’ll do it this way, your cost basis in the stock is down here.
So this is a way that you can essentially have a fairly risk-free way of making money on this stock just by betting that it WON’T come back down to this level. Because again, that would be your cost basis. I wouldn’t be selling a put lower than that because you are not getting enough money and you wouldn’t want to sell a put higher than that because it is just silly to sell in the money puts. This is a trade that I think would be something to consider. In fact, I will tell you this, I will be putting my Option Market Mentor people in this trade tomorrow. And we may even do it another way as well, which is, to buy the stock, sell the $40.00 call and the $35.00 put and we get double our fun. That way it is called a covered strangle.
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