#Fuzzy #SyntheticStock – No that’s not another California wildfire you smell…it’s me thinking! I’ve got a small list of tickers that I would be very interested in adding a Fuzzy or synthetic position to. With earnings coming up on all of these I was considering selling some aggressive puts down in areas I would like to add the Fuzzy anyway. Kinda like selling puts to acquire stock and then writing covered calls.

Since I tend to have bigger synthetic positions than I would with real stock, these put sales look like they could be quite profitable if the stock doesn’t happen to pull back enough. Another option would be to sell spreads too…then if the stock implodes the Fuzzy wouldn’t be down hardly any at all when it gets set. Or…sell naked puts at half size and then if the stock implodes add the other half down at that level. Either way…just roll the loss into the basis of the Fuzzy if the stock really drops…otherwise enjoy the huge gains from the put sales.

For example, one of my all time favorites is NVDA. Great premium and easy to roll. I would really be interested in going long starting down at the 200 level and adding below that. Let’s also assume that a 6 lot would be my max synthetic size.

I could sell a put ladder starting at 215 (or anywhere depending on appetite for risk) and then every 5 points below that down to 190. Premium would be about 19 dollars. Great trade if the stock rallies. If the stock tanks then put the synthetic on there while rolling the put sales into the basis. Obviously the trade would start out underwater similar to covered stock…which is ok. Plenty of time to sell weeklies to eventually profit.

I guess the point of this whole thing is that there may be some tickers you like that won’t come back enough to get an entry point. Selling the puts while waiting could pay off quite nicely too.