Today I’m recommending the following naked put write in Mattel, Inc. (NASDAQ:MAT):
Sell to open the MAT Feb. 16th $14 put at about $0.30.
Note: There are several February expirations available for MAT options. Be sure you are opening the monthly options that expire on Friday, Feb. 16, 2018.
I took this trade for one reason: The stock jumped last week with no reason given for it by anyone regarding why that happened. So, I figured something was happening that we don’t know about, “insider trading,” in a sense. Hasbro, Inc. (NASDAQ:HAS), I think, is thinking of acquiring Mattel. Potential takeover targets are great for writing puts, as the deal (or rumor of a deal) tends to put a floor under the stock price.
The goal here is for MAT to remain above $14 through expiration — thus allowing us to walk away with full profits. With put writes, I always say to use as short of a timeframe as possible…especially if you see a market crash down the road, as I do. If for whatever reason MAT has moved below $14 as expiration nears, we’ll need to exit our naked put to avoid the obligation to purchase shares.
But from a percentage point of view, MAT at about $16.50 is already pretty far from our strike price, and I’d expect that to remain the case through Feb. 16, especially if takeover talk does heat up.
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Ken Trester is editor of the popular Maximum Options program. Trester has been trading options since the first exchanges opened in 1973 with a winning streak that goes back to 1984 with money-doubling average annual profits since 1990.