Rolling our TOL puts to a lower strike price.
Shares of TOL pulled back with the overall market weakness. The good news is that the homebuilder market is still strong and inflation should drive higher selling prices (and higher profits). The bad news is that shares have pulled back below our strike price causing the price of our put contracts to trade higher.
We’re buying back our original TOL put contracts at a loss. But if our second put position expires, we’ll still be able to walk away from this trade with a profit despite the pullback for shares of TOL. And once our January put contracts expire, we can also look for opportunities to collect more income from selling new TOL put contracts.
- Buy (to close) our TOL January 21st $70 put
- Sell (to open) one TOL January 21st $65 put
- Limit: Net DEBIT of $3.10 or less
- The new position will represent roughly 7.2% of our model.
~~~~~~~~~~~ - 10:57 Executed
- Bot TOL Jan 21st $70 Put @ $5.76
- Sold TOL Jan 21st $65 Put @ $2.75
- Net Debit of $3.01
*NOTE: If you don’t have a position in TOL, simply sell the NEW put contracts to enter the trade. I recommend a limit of $2.60 or more for selling the new put contract.
- Sell (to open) one TOL January 21st $65 put
- Limit: $2.60 or more