[Rolling short Put on Briggs & Stratton (BGG)/Buying Jan 40 Puts (BGGMH) to close and Selling Feb 40 naked put (BGGNH) to open/Day Order/Limit Net Credit $0.40]
Dear Member,
Briggs & Stratton (BGG)remains below 40 and is not moving. Earnings are expected to be announced on the 21st which is also options expiration. I do now want to wait so I am adjusting my original credit spread position by rolling the Jan 40 Puts (BGGMH) that I originally sold out to Feb and am selling the Feb 20 Puts (BGGNH) naked for a net credit of $0.40. In other words, I am buying to close the Jan 40 puts and am selling the Feb 40 Puts.Originally, I took in a $0.45 a share credit. Now, by rolling out, I may be able to take in even more although the stock actually moved against me. If filled, I will also sell the Jan 37.50 Puts (BGGMU), but if that happens, I will send another alert.
Please note this roll from the Jan 40 puts to the Feb 40 puts will leave me naked with a risk of having the stock put to me if the options ultimately reach parity (i.e. have no time value). That is not currently the case so the risk of having the stock put to me is not great. The truth is, I would not mind having this stock put to me. Another alternative, if I didn't want to be naked or if my broker did not permit me to trade naked puts, would be to also buy the Feb 35 Puts and create another spread. As an aside, the risk graph for selling naked puts is the same as the risk graph for writing covered calls. I just have to make sure I have enough in my account to buy the stock at 40 if it is put to me.
DISCLOSURE: At the time of publication, I am short the Jan 40 puts and long the Jan 37.50 puts on BGG.
Sincerely,
Bill Kraft for
CutLoss
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