Rolling our CF puts to a lower strike price and new expiration date.
[TRADING NOTE: As the broad market moves lower, some of our income stocks are trading below our strike price. This leaves some put contracts that expire in May under water with less time for the stock prices to rebound.
One strategy to manage these positions is to buy back our existing put contracts, and then sell NEW call contracts with lower strike prices expiring in June.
This leaves us more time for the stocks to rebound. And thanks to the market volatility, we’re getting more lucrative income payments from these new put positions. So expect to see a few of these similar trades over the next few trading sessions.]
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Shares of CF Industries (CF) 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 CF 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 income play for CF 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 CF put contracts at a loss. But our second position should help to offset that loss and put us back on the road to growing your profits.
- Buy (to close) our CF May 20th $97.50 put
- Sell (to open) one CF June 17th $95 put
- Limit: Net CREDIT of $1.30 or more
- The new position will represent roughly 10.2% of our model.
~~~~~~~~~ - 11:50 Executed
- Bot CF May 20th $97.50 Put @ $5.75
- Sold CF May 20th $95 Put @ $7.25
- net Credit: $1.50
*NOTE: If you don’t have a position in CF, simply sell the NEW put contracts to enter the trade. I recommend a limit of $7.10 or more for selling the new put contract.
- Sell (to open) one CF June 17th $95 put
- Limit: $7.10 or more