General Motors’ (GM) recent run-up is allowing us to book a profit on our shares. Let’s exit the position now, and we will start fresh by selling a put on this core stock soon.
I am also recommending we roll our Micron Technology (MU) put to a higher strike while keeping the expiration date the same. The cash we generate will flip our net debit to cash in hand.
These two positions are great examples of the power of rolling to turn losing trades into profitable ones.
GM Uncovered Shares
Current Stock Price: $64.31
Cost Basis: $60.45
Action: Sell shares at market
Profit: $3.86, or $386 per 100 shares
Rate of Return: 6.4% in 190 days, or 12% on an annualized basis
MU Jan Week One (1/7) 87 Put
Current Stock Price: $95.15
Net Debit: $0.63
- Buy to close the MU Jan Week One (1/7) 87 Put for around $0.06
- Sell to open the MU Jan Week One (1/7) 94 Put for around $0.87
- Set your initial credit limit at $0.81, but adjust as needed to roll today
New Cash in Hand: $0.18
Expiration: After the close on Friday, Jan. 7
Potential Rate of Return: 0.2% in 296 days, or 0.2% annualized, if this option expires worthless