The Money Tree

Safely Generating Income in Retirement

Update – INTC

Posted by mounddweller on September 20, 2012

Fellow Traders,

I decided to roll-out my 5 INTC SEP $24 puts today to avoid assignment.  I looked at a couple different options (ha ha).

First I considered rolling out to DEC and down to the $23 strike price.  At the time the net credit was listed as $0.19.  That was a bit less than I was willing to take so I put in an order for $0.22 or better.  The primary benefit I saw in this trade was being able to lower my strike price while securing a net credit.  The downside was I had to go out to DEC to achieve it.

The other option I considered was the OCT $24 put where the net credit was listed as $0.22.  With this choice I got about the same amount of money but in about one-third the amount of time.

With these two choices in mind I looked at the following chart:

After looking at this chart which option would you pick?  I was leaning heavily toward the first one which I felt would leave me with a very good chance of avoiding assignment.  I felt sure with the decrease in the strike price I would have an opportunity to buy back the put on a rally in INTC or have it expire worthless.

However, the second option finally won out.  I decided that after having already sold two rounds of puts at the $24 strike I could sell one more with an OCT expiration and if INTC is below $24 at expiration I could accept having INTC put to me and position myself to receive the $0.225 dividend in early November.

So, here’s the trade I made.  I put in a trade to BTC 5 INTC SEP $24 and STO 5 INTC OCT $24 puts at $0.24 net credit or better.  It was filled late in the trading day.

Regards,

Troy

Advertisements

3 Responses to “Update – INTC”

  1. You sold another option further out, so you removed the risk of being assigned tomorrow; however, the new option has a 75% chance of being assigned. That’s fine, of course, if you are after being assigned, wishing to own INTC. In this situation I personally would have done an October 21 Back/Ratio, which has an 89% chance of expiring out of the money and would have not cost you anything. But that’s what makes the market the market, we all have different goals.

  2. Chester said

    Yes, that’s a close call. It depends on one’s goals I suppose. I probably would pick the second because I don’t want the shares. A 3rd option is to roll out at the same strike and lower from 5 contracts to 4 and still receive a net credit. Thanks for sharing your thoughts!

  3. […] Chester on Update – INTC […]

Leave a Reply

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

WordPress.com Logo

You are commenting using your WordPress.com 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: