Trading Take Two Interactive Ahead of the Fed

The market ended the day very nicely on Monday, but the back and forth among traders worried about inflation and higher interest rates restarted again on Tuesday.

We are still optimistic but feel it is best to remain cautious about adding too much risk to our portfolio.

We are particularly concerned that nervous traders might over-react to the Fed’s interest rate announcement later today.

If investors are already uncertain heading into that meeting, we think it is best to trade carefully.

We had shares of Take Two Interactive (NASDAQ:TTWO) put to us last week when our short puts expired in the money, and we now recommend selling short calls against the long stock position.

Doing this turns the trade into a covered call, which has a risk profile nearly identical to a short put.

The additional income will help us recover some of the lost value this month as well.

To take advantage of this situation, we recommend selling to open a TTWO covered call with a mid-April expiration, as they are offering good liquidity and solid premiums.

And we’re setting our strike price just below the price where we had the shares of TTWO put to us last week.

We anticipate that TTWO will remain below our strike price by expiration, which would allow us to keep the entire premium we receive for selling this covered call.

On the date of publication, John Jagerson & Wade Hansen did not hold (either directly or indirectly) any positions in the securities mentioned in this article.

John Jagerson & Wade Hansen are just two guys with a passion for helping investors gain confidence — and make bigger profits with options. In just 15 months, John & Wade achieved an amazing feat: 100 straight winners — making money on every single trade. If that sounds like a good strategy, go here to find out how they did it.

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