I am recommending we sell a put on SPDR S&P Biotech ETF (XBI) to take advantage of the risk-on trade.
The sector has outperformed the broader market so far this year, though not by a crazy amount. Given that the biotech sector is more volatile than most, we can collect an attractive premium for selling a short-term put.
Please do not chase the trade by accepting less premium than the “go as low as” price recommended below. Work your limit orders but exercise patience and let the trade come to you.
Current Stock Price: $87.70
Action: Sell to open XBI Feb Monthly (2/17) 85 Put
Current Option Price: $0.73-$0.78
Recommended Limit: Set your initial limit order at $0.75 You can go as low as $0.65, but please don’t start there and always use limit orders.
Expiration: After the close on Friday, Feb. 17
Potential Rate of Return: 0.9% in nine days, or 36% annualized, if this option expires worthless