Sold a New ABNB Naked Put

I was lucky enough to get out of ABNB when my April naked put expired and had enough sense not to jump back in during the middle of a steep decline. The price drop gained momentum until mid-May when it finally found a bottom and got a little bounce from those near-term lows. What we don’t know is if this is just a dead cat bounce or if ABNB is building a new level of support that it can grow from.

I think the latter is more likely and decided to risk a single naked put on my belief that even if it falls back to its recent lows, it’ll move higher again before long. While ABNB was trading at $147.92, I sold one ABNB July $135 naked put for $2.81 and received $280.37 after paying $0.63 in commission.

I wanted to push my trade out to the August contracts, but they aren’t available yet. If this trade works out for me, I could make a gain of 2.12% (21.58% annualized). That potential gain shows how much risk is involved considering I won’t lose a penny if ABNB falls 10.81%. Since I don’t think ABNB will fall below its mid-May intraday low of $130, my cost per share if assigned of $132.20 seems like a fantastic entry point.

My timing could be way off since this summer could be slower to gain steam for travelers than I expect, but 2022 should be a massive year for vacations. A huge increase in vacations will bring a revenue surge for ABNB. A lot of that expectation is priced into the stock already and I could be taking more risk than I should. I can accept that risk. 

If I do see a better base forming for longer, I might close this July naked put early and sell an August contract at a higher strike in a couple of weeks. We have only six more trading days before the August contracts post and if ABNB is still above $145 in six more days, the risk will be lower that the recent move higher was an anomaly. While I like the company and use their services when I travel, I am stepping out of my standard trading rules with ABNB. I prefer companies that make a profit and I tend to miss out of younger companies that have more potential because I’d rather take a lower risk approach. I’m making an exception here and hopefully it doesn’t bite me for trying something different.