MSL War — Why One Modified Synthetic Long Works and the Other Doesn't

Today is an unusual day. I have two trades I am looking at — both discussed by Invest Answers this week — and I actually like both stocks. But the trade structures are completely different. I do not normally have this opportunity to show you two setups side by side on the same day, so I am excited to walk you through my process.

This is not financial advice. I am simply showing you how I make decisions — and more importantly, how I say no even when I like the stock.

Trade #1: SATS — The MSL That Works

SATS is in a trading range. We just tested the high end with a positive-two mean reversion, and we have come back down to around $110. Could we get to $105 again? Sure. But I am setting a trade two years out, so I am not overly concerned about the short-term move. I am more concerned about my trade structure.

Here is what I am looking at: a December 2027 modified synthetic long.

• Buy the December 2027 $90 call — this is the option with roughly 50/50 intrinsic to extrinsic

• Sell the December 2027 $100 put

• Buy the December 2027 $80 put (hedge)

That put spread is $20 wide. I take the credit from it and apply it toward the $90 call.