I am recommending we roll our Best Buy (BBY) and SPDR S&P Biotech ETF (XBI) puts. We are going out two weeks due to next week’s Federal Reserve meeting. While the Fed is widely expected to raise rates 0.75%, the market could move sharply in either direction based on the actual size of the rate hike and the Fed’s choice of language.
BBY fell below our put’s strike thanks to the brutal market sell-off following the release of the disappointing August consumer price index. We are rolling to buy time for shares to recover and also picking up a large chunk of cash.
While our XBI put is currently on track to expire worthless, I am recommending we roll it to a lower strike. This will allow us to generate more income while reducing our exposure to this volatile fund.
BBY Sep Monthly (9/16) 75 Put
Current Stock Price: $73.42
Net Debit: $18.66
- Buy to close the BBY Sep Monthly (9/16) 75 Put for around $1.98
- Sell to open the BBY Sep Week Five (9/30) 75 Put for around $3.70
- Set initial credit limit at $1.72, but adjust as needed to roll today
New Net Debit: $16.94
XBI Sep Monthly (9/16) 82.50 Put
Current Stock Price: $84.35
Net Debit: $8.42
- Buy to close the XBI Sep Monthly (9/16) 82.50 Put for around $0.65
- Sell to open the XBI Sep Week Five (9/30) 80 Put for around $1.50
- Set initial credit limit at $0.85, but adjust as needed to roll today
New Net Debit: $7.57