Rolling our CF puts to a lower strike price and July contract.
Shares of CF Industries (CF) have been trading in a tight range very close to our $95 strike price.
Our June put contracts are set to expire in two weeks and we currently have a nice profit from this income play.
Today, I want us to go ahead and lock in this profit by closing out our June put contracts. We’ll then enter a NEW income play by selling July put contracts with a lower strike price.
This lets us continue to profit from strength in the fertilizer business. But we’ll be reducing our risk by using a lower strike price (which gives us more of a safety buffer if shares of CF pull back).
By selling the CF July $90 puts near $3.80, we’re able to collect an annualized yield near 37%, while also giving us roughly $6.00 per share in cushion between the current market price for CF and our strike price.
- Buy (to close) our CF June 17th $95 put
- Limit: $3.70 or less
~~~~~~~ - 10:13 Executed
- Bot CF Jun 17th $95 Put @ $3.34
ALSO
- Sell (to open) one CF July 15th $90 put
- Limit: $3.80 or more
- The new position will represent roughly 10.0% of our model.
~~~~~~~~ - 10:13 Executed
- Sold 1 CF Jul 15th $90 Put @ $3.80