Thinking About Gambling on DJT Stock Options? Read This First.

“The Donald” has done it — at least in the eyes of his followers and the legions of entities following his every move. According to a Barron’s report, betting markets PredictIt and Polymarket tip Donald Trump to win the contentious November election. It’s no wonder, then, that Trump Media & Technology Group ($DJT) has been skyrocketing.

Just on Monday alone, DJT stock gained more than 18%. Over the past five sessions, it’s up over 57%. And in the trailing month, shares have returned 73.32%, bringing the year-to-date tally well into positive territory. Naturally, as a consequence, DJT options’ implied volatility (IV) — a barometer for anticipated market movement — shot significantly higher.

At the moment, the average IV clocks in at stunning 270.09%, well above the historical volatility (HV) of 125.68%. Essentially, the market sees even more mobility in DJT stock than would be normally expected — which, by the way, is a lot.

With premiums for options mooning, some speculators are eyeballing the idea of selling these derivative contracts. However, even with risk-managed trades such as the bull put spread, writing options on DJT stock is incredibly risky. One wrong swing in the unintended direction can easily blow up your position.

But What Credit Spread Is the Best for DJT Stock?

Despite the enormous risks involved, if you’re still intrigued by the idea of selling DJT stock options, there is one bull put spread that stands out: the 26/25 spread for the options chain expiring Oct. 18, 2024.

• Sell the $26 put (at a time-of-writing bid of 77 cents).

• Buy the $25 put at an ask of 53 cents.

• The difference between the two represents the maximum reward of 24 cents in credit (income).

• The most we can lose in this setup is 76 cents.

• Notably, the yield stand sat 31.58%.

• The breakeven price is $25.76.

Why is this trade arguably the best one? Well, to be clear, credit spreads on DJT stock represents an extremely speculative affair. Something that shoots dramatically higher can just as easily fall. That said, the 26/25 spread gives you a compelling (relatively speaking) balance between risk and reward.

First, the breakeven price is 13.99% below Monday’s closing price of $29.95. That gives you a lot of cushion to work with, though you should keep in mind that DJT’s 60-month beta is 5.78. Second, the yield of 31.58% means that you only have to put at risk $3.17 for every $1 of income received.

For an option that’s about to expire in a few days, you’re not going to get this kind of nominal breadth. Then again, traders typically don’t write credit spreads on securities with beta ratings of 5.78.

The other factor that makes the aforementioned trade enticing is that it's much more rational than other spreads. For instance, the 25/24 spread features a gap to breakeven of 17.1%. However, the yield is only 20.5%. That means you're getting much more benefit from the 26/25 spread for a relatively modest increase in risk exposure.

It’s really up to you. But if you are going to wager on DJT stock on the credit side, the 26/25 spread is likely the best one to execute.

Disclaimer: The content provided in this article is for informational purposes only and should not be considered financial advice. Options trading carries significant risk and may not be suitable for all investors. Before engaging in any trading activity, investors should assess their risk tolerance and seek advice from a qualified financial advisor. The performance of any specific stock or trade strategy mentioned does not guarantee future results, and investors should conduct their own research before making any financial decisions.