Rolling our VALE puts to a lower strike price and new expiration date.
Shares of iron ore producer VALE S.A. (VALE) have pulled back during this turbulent market period. Some investors worry that a weakening Chinese economy could reduce demand for steel (and drive prices for iron ore lower).
Recently, the Chinese government has signaled they may be willing to ease lockdowns and provide other measures to help the Chinese economy continue to grow. This is good news for VALE and shares have begun to rebound.
Today, we’re going to use our parachute protection plan to buy back our original VALE 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 VALE 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 VALE 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 VALE May 20th $19 puts
- Sell (to open) three VALE June 17th $15 puts
- Limit: Net DEBIT of $2.80 or less
- The new position will represent roughly 5.1% of our model.
~~~~~~~ - 10:56 Executed
- Bot VALE May 20th $19 Puts @ $3.34
- Sold VALE Jun 17th $15 Puts @ $0.54
- Net Debit: $2.80
*NOTE: If you don’t have a position in VALE, simply sell the NEW put contracts to enter the trade. I recommend a limit of $0.50 or more for selling the new put contracts.
- Sell (to open) three VALE June 17th $15 puts
- Limit: $0.50 or more