Using deep in-the-money (ITM) debit spreads allows you to enter positions and try to lock in premium while keeping your theta decay positive. These are much like selling out-of-the-money (OTM) put spreads are your outlook is neutral to bullish on the underlying stock.
Technically, the S&P 500 visited and held the 1040-1050 are this morning on the heels of horrid housing data. We are looking for intraday strength and oversold stocks to initiate these deep ITM spreads.
BJ Wholesale (BJ) pulled back nicely at the open to the former breakout level of $40 and has bounced nicely off it. Even in a weak market this stock can hold up well based on the underlying fundamentals of the company.
With only 24 days until September expiration, we can initiate a high probability spread that will profit from neutral and bullish activity in the underlying stock.
BOT +3 VERTICAL BJ 100 SEP 10 35/40 CALL @4.25