The market has been savaged by fears of inflation, recession and higher interest rates. Since the May inflation report was released one week ago, the S&P 500 is down nearly 9%.
All of our expiring put positions — Bank of America (BAC), General Motors (GM), Lyft (LYFT), Marvell Technology (MRVL), Pfizer (PFE) and Sunrun (RUN) — are deep underwater.
I am recommending we accept shares, as the math of selling calls simply makes more sense in the current market environment than continuing to roll the puts. Not only will we be able to collect cash, but we can capture potential appreciation when the market recovers.
The goal will be to generate a 0.5% 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 Live Trading Session.
Finally, our Charles Schwab (SCHW) call is on track to expire worthless. I will recommend a new call to sell soon.
BAC Jun Monthly (6/17) 35 Put
Current Share Price: $31.89
Net Debit: $7.75
Action: Accept shares
Cost Basis: $42.75
Potential Rate of Return: I am targeting breakeven for this position
GM Jun Monthly (6/17) 38 Put
Current Share Price: $31.58
Net Debit: $9.42
Action: Accept shares
Cost Basis: $47.42
Potential Rate of Return: I am targeting breakeven for this position
LYFT Jun Monthly (6/17) 20 Put
Current Share Price: $14.62
Net Debit: $1.45
Action: Accept shares
Cost Basis: $21.45
Potential Rate of Return: I am targeting breakeven for this position
MRVL Jun Monthly (6/17) 60 Put
Current Share Price: $45.50
Net Debit: $9.69
Action: Accept shares
Cost Basis: $69.69
Potential Rate of Return: I am targeting breakeven for this position
PFE Jun Monthly (6/17) 52 Put
Current Share Price: $46.35
Net Debit: $7.92
Action: Accept shares
Cost Basis: $59.92
Potential Rate of Return: I am targeting breakeven for this position
RUN Jun Monthly (6/17) 30 Put
Current Share Price: $23.42
Net Debit: $14.98
Action: Accept shares
Cost Basis: $44.98
Potential Rate of Return: I am targeting breakeven for this position
SCHW Jun Monthly (6/17) 70 Call
Current Share Price: $60.77
Cost Basis: $71.95
Action: Watch call expire worthless
Potential Rate of Return: I am targeting breakeven for this position