The Money Tree

Safely Generating Income in Retirement

Rollouts on FRX and UNG

Posted by mounddweller on July 14, 2009

Guys and gals,

I executed two rollouts today against my open positions in FRX and UNG.  Those of you who have been following my trades know that I’ve been in FRX since January.  I originally entered the position by buying 200 shares at around $25 and change.  I then sold the February $25 calls.   Since then I’ve acquired an additional 200 shares after having shares put to me at $22.50.  I’ve also been able to sell the $25  calls almost every month.  This month, like last month, I decided to rollout my position rather than wait for expiration day on Friday.  However, my reasoning this month was different than last month.  Last month you’ll recall I wanted to roll early because I felt there was an opportunity for the stock to go ITM prior to expiration.   Not wanting to take a chance on getting assigned I decided to take advantage of a decent premium on the rollout.  This month my reasoning was just the opposite.  The market has rallied sharply the past couple of days but I fear we may have a sell-off before Friday expiration.  Thus, I wanted to capture the relatively high premium tied to today’s price rather than chance having to sell another round of calls after expiration at a much lower premium.    The bottom line result is I was able to rollout to the AUG $25 calls for a net credit of $0.75.   My net cost basis is now $20.50 while my ROIC is now 18.71% (31.19% annualized). 

For those of you who don’t yet own FRX, it isn’t too late to get into this high quality stock.  With a market cap of $7B FRX has $2B in bare cash!  Below is a current VISIONS chart of FRX.



Now, let’s talk about my NP position in UNG.  Those of you who follow the natural gas market know there is currently a glut.  Thus, prices are very low.  Since UNG is an ETF whose price is determined by the price of natural gas futures it too has continued to fall.  When I originally initiated my position in UNG naked puts UNG was trading over $15/share.  It had never closed below $13 so I felt reasonably safe in writing the JUL $13 naked puts.  Well, never say never.  Over the past couple of weeks UNG sliced through $13 on its way to setting a new 52-wk low of $12.03.  It has since recovered and moved back up to around $12.50.  Seeing this I decided to take advantage by rolling to the AUG $13 naked puts for a net credit of $0.70.  If UNG remains below $13 at expiration in AUG and I choose to allow the stock to be put to me I will have a net cost basis of $12.00.  If unassigned my ROIC will be 7.69% for two months.  That sure beats the interest Schwab is paying me on my cash reserves!

Best of luck to y’all in your trading. 



PS.  My NP trades in O and TK remain open.  I’ll be updating you on them after expiration Friday.

2 Responses to “Rollouts on FRX and UNG”

  1. Rich said


    I also rolled some calls forward today. I have positions in GE and XLF which are currently upside down so I’ve been trying to roll the calls forward whenever possible, gaining a little of the basis back at a time. I bought GE back in the fall when their dividend was still at 30 cents a share. They subsequently lowered the dividend to 10 cents as the market took another downturn. So now I’m trying to play catch up. I bought back JUL 12 calls on both positions and sold Aug 12 calls. I’m hoping as the market slowly moves up I can sell calls at 13 eventually. I gained an extra $66 in premiums combined in the roll forward.


  2. mounddweller said


    I am under water in GE as well. Bought it last year long before I started using VISIONS and following Ron’s methodology. Also was in XLF last year. Thankfully I got out of XLF before it crashed. It was one of the few trades I got right in 2008. I’m doing much better this year now that I am using VISIONS. Haven’t had any losers.

    Good luck!


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