ITG Put Option Trade Alert

  • Stock: Eastman Chemical Company (EMN)
  • Current Price: $70.56
    • Trade: Buy September Week 3 (expires September 20, 2019) $70 Put.
    • Trade Type: Market Current Ask: $4.30

After its latest earnings report in late April disappointed, EMN has sold off sharply, reversing a short-term upward trend off of a high around $85. In the last week and a half, the stock broke below major support at around $74, and is currently about $4 per share away from a multi-year low at around $67.40. If that support level doesn’t hold, the stock will likely drop into the $64 to $65 range before finding any new support. The stock’s current bearish momentum appears to make that support low test very likely right now, which is the primary basis for this put option trade.

  • Closest resistance for the stock is around $72. Total distance from stock’s current price: $1.50 per share. Set stop loss at break above $72.
  • Option Delta is -.451 (remember that put options use negative numbers for Delta, but the math works the same way as for call options). Estimated stock move from current price is $6, so the estimated positive option price move is $2.70. Return: 63%
  • Estimated negative option price move is $.68. Loss: -15.7% Reward: risk for the trade is 4:1.

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