Rolling our Z puts to a lower strike price.
Shares of Zillow have pulled back with the overall market weakness. The good news is that our income strategy gives us some buffer for when stocks pull back.
Today, we’re going to use our parachute protection plan to buy back our original Z put contracts at a higher price. This helps to reduce our risk and protect your investment capital.
At the same time, we’re going to be rolling out a new put play on Z using a lower strike price. This creates more of a buffer helping to protect your wealth while giving us more income from this stock.
We’re buying back our original Z 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 Z. And once these put contracts expire, we can also look for opportunities to collect more income from selling new Z put contracts.
- Buy (to close) our Z May 20th $50 put
- Sell (to open) one Z May 20th $45 put
- Limit: Net DEBIT of $2.85 or less
- The new position will represent roughly 4.6% of our model.
~~~~~~ - 10:58 Executed
- Bot Z May 20th $50 Put @ $5.84
- Sold Z May 20th $45 Put @ $3.19
- Net Debit: $2.65
*NOTE: If you don’t have a position in Z, simply sell the NEW put contracts to enter the trade. I recommend a limit of $3.15 or more for selling the new put contract.
- Sell (to open) one Z May 20th $45 put
- Limit: $3.15 or more