JD Short Call Spread

It seems JD can’t do anything wrong. It had decent numbers on last week’s earnings, the market is feeling better about US-China trade, and the stock even rallied on the news that it would be merging with FTCH, a luxury online retailer. Of course, with FTCH worth about $9 bln and JD worth about $42 bln, “acquisition” might be a more appropriate term, and that could be a big bite for JD to digest. Despite that, JD is up 38% this year, so everything appears to be pointing north. But is JD a buy the rumor, sell the news situation? Volume, which had been very high in its post-earnings rally, has slowed down. Demand for JD might be tapering off. JD’s IV rank is still 52%, and that makes short option strategies still attractive. If you think that JD might not be able to sustain its rally and are bearish on it, the short call vertical that’s short the 30 call and long the 32 call in the April weekly expiration with 38 DTE is a bearish strategy that collects a credit 1/3 the width of the strikes, has a 75% prob of making 50% of its max profit before expiry, and that generates $.44 of positive daily theta.

This Trade Is

Total P/L
49.15%
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