I am recommending we roll our CVS Health (CVS) and Micron Technology (MU) calls out one week.
CVS is expected to announce earnings before the market open next Friday, the day the new option will expire. I plan to hold the position through earnings, which is why we are rolling up to a higher-strike call that is considerably out of the money.
With today’s MU roll, our cost basis will be below our strike. This means that if our shares are called away, we will book a small profit after digging ourselves out of a big hole.
CVS Oct Week Five (10/30) 59 Call
Current Stock Price: $55.78
Cost Basis: $61.89
Action:
- Buy to close the CVS Oct Week Five (10/30) 59 Call for around $0.03
- Sell to open the CVS Nov Week One (11/6) 60 Call for around $0.35
- Set your initial credit limit at $0.32, but adjust as needed to roll today
New Cost Basis: $61.57
Expiration: After the close on Friday, Nov. 6
Potential Rate of Return: I am targeting breakeven for this position
MU Oct Week Five (10/30) 51 Call
Current Stock Price: $50.51
Cost Basis: $51.25
Action:
- Buy to close the MU Oct Week Five (10/30) 51 Call for around $0.26
- Sell to open the MU Nov Week One (11/6) 50 Call for around $1.88
- Set your initial credit limit at $1.62, but adjust as needed to roll today
New Cost Basis: $49.63
Expiration: After the close on Friday, Nov. 6
Potential Rate of Return: 0.7% in 262 days, or 1% annualized, if shares are called away