I am recommending we roll our Bank of America (BAC) and Intel (INTC) calls, as well as our Corning (GLW) put.
Micron Technology (MU) has been falling since the company lowered its guidance for its fiscal fourth-quarter results last week, with management warning that the demand outlook for memory chips is worsening.
With the stock trading well below the strike price of the put we sold, I am recommending we allow ourselves to be assigned shares at expiration tomorrow rather than continue to roll the put. We will sell a call next week.
The stock is grossly undervalued and periods of volatility like the one we’re experiencing now are not uncommon. The upside to this volatility is outsized option premiums. That’s why I’m confident we can steadily generate cash to work our way back toward breakeven or even profitability.
BAC Aug Monthly (8/21) 25 Call
Current Stock Price: $25.12
Cost Basis: $25.32 (Note that the cost basis was incorrectly listed as $25.59 in the previous alert.)
Action:
- Buy to close the BAC Aug Monthly (8/21) 25 Call for around $0.27
- Sell to open the BAC Aug Week Four (8/28) 25.50 Call for around $0.33
- Set your initial credit limit at $0.06, but adjust as needed to roll today
New Cost Basis: $25.26
Expiration: After the close on Friday, Aug. 28
Potential Rate of Return: I am targeting breakeven for this position
GLW Aug Monthly (8/21) 32 Put
Current Stock Price: $32.04
Cash in Hand: $0.43
Action:
- Buy to close the GLW Aug Monthly (8/21) 32 Put for around $0.20
- Sell to open the GLW Aug Week Four (8/28) 32 Put for around $0.61
- Set your initial credit limit at $0.41, but adjust as needed to roll today
New Cash in Hand: $0.84
Expiration: After the close on Friday, Aug. 28
Potential Rate of Return: 2.6% in 18 days, or 53% on an annualized basis, if this option expires worthless
INTC Aug Monthly (8/21) 49 Call
Current Stock Price: $49.39
Cost Basis: $59.82
Action:
- Buy to close the INTC Aug Monthly (8/21) 49 Call for around $0.63
- Sell to open the INTC Aug Week Four (8/28) 49 Call for around $1.07
- Set your initial credit limit at $0.44, but adjust as needed to roll today
New Cost Basis: $59.38
Expiration: After the close on Friday, Aug. 28
Potential Rate of Return: I am targeting breakeven for this position
MU Aug Monthly (8/21) 52 Put
Current Stock Price: $42.84
Net Debit: $1.16
Action: Accept shares
Cost Basis: $53.16