Hey guys and gals,
Look at this insane move on VERU…
It gapped up roughly 150% from $6 to about $15. Now, that sounds exciting…
But unless you’re a day trader or love scalping…
Volatile penny stocks like this are too risky to dive in (especially for folks that aren’t experienced).
This is a massive spike within a short period, so buying the stock would be too risky.
Typical Call or Put options wouldn’t be a good idea too, because this volatility would send the premium prices out the roof.
So…
What’s the best way for me to play this?
Vertical Call Spread.
Now, options aren’t typical with penny stocks. But when it’s possible…a bear call spread is a nice strategy I like.
What I’m doing is buying and selling a call option at different strike prices…but within the same expiration cycle.
Why?
Because it’s safe — I can reduce risk while still aiming for profit.
In this case, I sold the $12.50 Call and bought the $17.50 Call option.
The entry was $1.60 which means I’m at risk of losing $3.40 per contract. And I did 10 contracts with Friday as the expiration date.
What are the possible outcomes?
Well, if the stock price is below $12.50, I make 100% of the $1.60 entry.
And if the stock price is above $17.50, I lose 100% of the $3,400.
The bottom line is…
I’m using $3,400 to try and make $1,600 by Friday
I’m also relying on the fibonacci retracement here, so if you’d like a detailed lesson — with real-money examples…
Check out this Fibonacci lesson I added to your RagingBull dashboard.
What do you think of this trade?
