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Sally Modzelewski
I am a new member for Income Millionaire. I did place the naked Put BPL. Now I have questions? If the BPL trade below the strike price of $40.00, I will have to purchase the stock with discount. If I do not want to own this stock: do I have any other strategy to roll this put ?
Please your assistant are gratefully appreciated.
Ari Charney
Hi Sally,
I’m monitoring the underlying stock closely and am considering a couple ways of dealing with potential assignment:
1) Rolling to a lower strike in a future month. The downside here is that the potential credit from selling another put at a lower strike (plus the initial premium collected from selling the first put) may not fully offset the cost of buying back the put we sold.
2) Taking short-term ownership of the stock (possibly for a little less than a month) and selling the June $40 call against it. That gives us a chance to collect another premium with the possibility of having the stock called away at the price it was put to us. The downside here is potentially having to hold the stock longer if the June call expires out of the money.
If I decide to roll the put, I may look to do that before the stock trades ex-div on Friday. That would mean an Alert by Thursday afternoon, at the latest. Alternatively, depending on where the stock is trading, it may make more sense to wait until early next week, since the high quarterly payout will be factored into the option price until the ex-date.
Stock Talk
Sally Modzelewski
I am a new member for Income Millionaire. I did place the naked Put BPL. Now I have questions? If the BPL trade below the strike price of $40.00, I will have to purchase the stock with discount. If I do not want to own this stock: do I have any other strategy to roll this put ?
Please your assistant are gratefully appreciated.
Ari Charney
Hi Sally,
I’m monitoring the underlying stock closely and am considering a couple ways of dealing with potential assignment:
1) Rolling to a lower strike in a future month. The downside here is that the potential credit from selling another put at a lower strike (plus the initial premium collected from selling the first put) may not fully offset the cost of buying back the put we sold.
2) Taking short-term ownership of the stock (possibly for a little less than a month) and selling the June $40 call against it. That gives us a chance to collect another premium with the possibility of having the stock called away at the price it was put to us. The downside here is potentially having to hold the stock longer if the June call expires out of the money.
If I decide to roll the put, I may look to do that before the stock trades ex-div on Friday. That would mean an Alert by Thursday afternoon, at the latest. Alternatively, depending on where the stock is trading, it may make more sense to wait until early next week, since the high quarterly payout will be factored into the option price until the ex-date.
Ari
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Sally Modzelewski
Ali,
Thank you for your advice.
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