We are on track to be assigned shares of Walt Disney (DIS) and our protective put is on track to expire worthless.
As you’ve seen me say in other alerts today, the math of selling calls simply makes more sense in the current market environment than continuing to roll the put. Not only will we be able to collect cash, but we can capture potential appreciation when the market recovers.
Our Kroger Co. (KR) call and protective put are also on track to expire worthless. The stock sold off around 7% today on the heels of yesterday’s first-quarter earnings announcement. That was despite the company reporting stronger-than-expected sales and earnings and boosting its full-year profit forecast.
Wall Street seemed to take issue with management’s 2022 same-store sales guidance of 2% to 3.5%. The consensus estimate of 3.2% was above the midpoint of the forecast. A Wall Street Journal article calling the stock “inflated” didn’t help.
The sell-off wasn’t enough to push our protective put to a meaningful profit. But I think it was an overreaction.
I will be recommending calls to sell against DIS and KR soon. The goal will be to generate a 0.5% weekly cash return on these positions. However, I may accept a lower cash rate of return if I believe there is significant potential for short-term appreciation.
I will be discussing this strategy in greater detail during Tuesday’s Income Masters Live Trading Session.
DIS Jun Monthly (6/17) 107 Put
DIS Jun Monthly (6/17) 92 Put
Current Stock Price: $94.92
Net Debit: $13.64
Action:
- Accept shares
- Watch the DIS Jun Monthly (6/17) 92 Put expire worthless
New Cost Basis: $120.64
KR Jun Monthly (6/17) 52 Call
KR Jun Monthly (6/17) 45 Put
Current Stock Price: $46.42
Cost Basis: $56.65
Action:
- Watch the KR Jun Monthly (6/17) 52 Call expire worthless
- Watch the KR Jun Monthly (6/17) 45 Put expire worthless