The Money Tree

Safely Generating Income in Retirement

Rollout on UNG

Posted by mounddweller on October 15, 2009

I rolled out my UNG puts again this morning.  However, this time I did it with a different strategy in mind.  As you know I originally sold UNG $13 several months ago.  Since then UNG has never come close to getting back above $13.  For the past several months I have been able to buy back the prior months puts and sell re-sell the $13 puts one month further out. 

Unfortunately, for whatever reason, this month that strategy wasn’t going to generate a very profitable trade.  I was only going to be able to generate a $0.15 credit.  So, instead I decided to bite the bullet and roll down and out for a net debit.  Here’s the trade I made:

BTC – OCT $13 puts for $1.80

STO – JAN ’10 $11 puts for $0.95

As you can see this resulted in a net debit of $0.85 ($850.00) coming out of my account.  Why did I do it?  Well, first off in looking at the chart it appeared UNG had hit the lower leg of its Bollinger band on Wednesday and bounced higher today.  Thus, my thought was if I rolled down and sold the $11 put I would be able to profitably buy it back later this month as UNG went back up towards $12.  Secondly, if that doesn’t happen I will still be in a much nicer position to manage the trade going forward.

I was able to execute this trade and still maintain a small overall profit on my UNG position.  Below is an updated version of my transaction summary.  As you can see I still have a $1.20 profit.

Blog UNG Position

Leave a Reply

Fill in your details below or click an icon to log in: Logo

You are commenting using your account. Log Out /  Change )

Google photo

You are commenting using your Google account. Log Out /  Change )

Twitter picture

You are commenting using your Twitter account. Log Out /  Change )

Facebook photo

You are commenting using your Facebook account. Log Out /  Change )

Connecting to %s

%d bloggers like this: