Last week, I made an adjustment to the Seagate Technology (STX) when the stock suddenly dropped.
Maybe, I was a bit hasty adjusting the trade as the stock seemed to recover the losses. The sell off happened upon a downgrade from some so-called analyst who thought he could predict the future and all those clowns at Wall Street started hastily selling.
Normally, if this was my regular strangle trade I would do nothing about the trade and wait but this was a triple play trade where I didn’t want assignment of the puts at $48.50 a share when the stock dropped to $45 a share.
So I rolled.
I rolled puts down to $48.00 and sold calls at 46.50 strike. By the end of Friday last week, the stock recovered to $47.28…
Maybe, I was too in rush adjusting the trade.
Now my calls were in the money and if the stock continued higher the following week I ran into a risk of having those calls early assigned. That’s not what I wanted.
Thus, I placed a roll trade for Monday morning to adjust the trade once again.
This adjustment however required additional margin requirement. The idea was to leave the existing 48.00 puts untouched. I hoped for them to either expire worthless (should the stock continue higher), let them assign (should the stock stay near the money), or roll them into the next week (should the stock continue down).
Then, we rolled our calls into March 24 expiration and two strikes OTM and sell new OTM puts. Here is the trade and existing trade:
-1 STX Mar17 48.00 put (existing trade to remain)
BTC 1 STX Mar17 46.50 call (existing calls to be rolled)
STO 1 STX Mar24 48.00 call (new rolled calls)
STO 1 STX Mar24 46.50 put (sold new puts to create a covered strangle)
@ 38.00 credit limit DAY
If everything goes well, I expect the original put either expire or get assigned this week. If it expires or I have to roll it, I will buy 100 shares of STX outright. Next week, hopefully the calls will get assigned (and we will sell the shares) and the new puts expire worthless. But as of now we have to wait for the results.
Hope this adjustment would work well.
Here is the previous post about the trade which we have adjusted today:
– Seagate Technology (STX) triple play trade adjustment after stock drop Published 2017/03/09
– STX dividend capture – triple play Published 2017/03/07