I am recommending we roll our Bank of America (BAC) put to generate more income and reduce our net debit on the position. 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 or the Fed’s choice of language. Keep in mind that higher interest rates benefit the bank.
You can enter the second leg of the BAC trade even if you were not in the previous one. Just be aware that we will be managing and tracking it based on the ongoing position.
I am also recommending we roll our Sunrun (RUN) call out to next month and to a higher strike price. While we will be spending some cash to do so, we will pick up another $5 per share in potential appreciation. I expect the solar sector to continue to benefit from positive sentiment following the passage of a major climate change bill.
Therefore, if you are not currently in the RUN position and would like to enter it today, you can do so provided you are comfortable being in the position for a few months or more. Note that you must first buy 100 shares of the stock for every call you plan to sell. And be aware that we will be managing and tracking it based on the ongoing position.
BAC Sep Monthly (9/16) 34 Put
Current Stock Price: $34.43
Net Debit: $7.83
Action:
- Buy to close the BAC Sep Monthly (9/16) 34 Put for around $0.16
- Sell to open the BAC Sep Week Five (9/30) 34 Put for around $0.75
- Set your initial credit limit at $0.59, but adjust as needed to roll today
New Net Debit: $7.24
Expiration: After the close on Friday, Sept. 30
Potential Rate of Return: I am targeting breakeven for this position
RUN Sep Monthly (9/16) 35 Call
Current Stock Price: $37.85
Cost Basis: $44.09
Action:
- Buy to close the RUN Sep Monthly (9/16) 35 Call for around $3
- Sell to open the RUN Oct Monthly (10/21) 40 Call for around $2.95
- Set your initial debit limit at $0.05, but adjust as needed to roll today
New Cost Basis: $44.14
Expiration: After the close on Friday, Oct. 21
Potential Rate of Return: I am targeting breakeven for this position