Rolling our SLB puts to a higher strike price and July contract.
Shares of SLB have traded higher as demand for drilling services picks up.
Now that the stock is trading higher, our June $37.50 puts are much cheaper. So we can buy out of our agreement at a very low price. This allows us to lock in profits and free up cash.
We’ll then use that cash to set up a new income play by selling put contracts with a higher “strike price” (or agreement price). This way we can continue to generate income from shares of SLB.
By selling the SLB July $42.50 puts near $3.00, we’re able to collect an annualized yield near 44%, while also giving us roughly $0.50 per share in cushion between the current market price for SLB and our strike price.
- Buy (to close) our SLB June 17th $37.50 puts
- Limit: $0.70 or less
~~~~~~~~ - 15:36 Executed
- Bot SLB Jun 17th $37.50 Puts @ $0.68
ALSO
- Sell (to open) two SLB July 15th $42.50 puts
- Limit: $3.00 or more
- The new position will represent roughly 9.5% of our model.
~~~~~~~ - 15:36 Executed
- Sold 2 SLB July 15th $42.50 Puts @ $3.00