I am recommending we roll our Mosaic (MOS) and Nike (NKE) 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.
MOS fell as much as 8% earlier this week on concerns of a potential rail strike, as most of its fertilizer is moved via railcar. Unions and management reached a tentative deal today, averting a strike. Our put is currently out of the money. I am recommending we roll strike to strike to generate more cash and reduce our net debit on the position.
This week’s market sell-off following a disappointing August consumer price index took NKE below our put’s strike. We are rolling to buy time and generate a large amount of cash. Note that Nike is scheduled to report earnings on Sept. 29. We will exit the put prior to the announcement and re-enter the position once we see how the market reacts.
MOS Sep Monthly (9/16) 52 Put
Current Stock Price: $53.20
Net Debit: $7.96
- Buy to close the MOS Sep Monthly (9/16) 52 Put for around $0.33
- Sell to open the MOS Sep Week Five (9/30) 52 Put for around $1.68
- Set initial credit limit at $1.35, but adjust as needed to roll today
New Net Debit: $6.61
NKE Sep Monthly (9/16) 110 Put
Current Stock Price: $106.97
Net Debit: $13.90
- Buy to close the NKE Sep Monthly (9/16) 110 Put for around $3.15
- Sell to open the NKE Sep Week Five (9/30) 110 Put for around $5.95
- Set initial credit limit at $2.80, but adjust as needed to roll today
New Net Debit: $11.10