We allowed our shares of Citigroup (C) to be called away last week, incurring a net debit on the position. The goal was to avoid this week’s earnings announcement and, therefore, any unnecessary risk.
The bank reported better-than-expected earnings this morning, yet shares are down about 2%. We can capitalize on the post-earnings volatility by selling a put. The income we generate will reduce our net debit on the position.
However, you can enter today’s trade even if you were not in the previous position. Just be aware that we will be tracking and managing the trade based on the ongoing position.
Current Stock Price: $66.24
Net Debit: $5.77
Action: Sell to open the C Jan Monthly (1/21) 65 Put
Current Option Price: $0.43-$0.48
Recommended Limit: Set your initial limit order at $0.45, but adjust as needed to sell a put today
New Net Debit: $5.32
Expiration: After the close on Friday, Jan. 21
Potential Rate of Return: I am targeting breakeven for this position