Stocks sold off late Wednesday following the release of the minutes from the Federal Reserve’s July meeting, which showed that officials mostly agree they will start tapering bond purchases this year.
Pfizer (PFE) and PulteGroup (PHM) have dipped below the respective strike prices of the puts we sold. Therefore, I am recommending we roll out one week to generate more income and to buy us some time for shares to move higher again.
PFE Aug Monthly (8/20) 51 Put
Current Stock Price: $49.68
Cash in Hand: $1.65
Action:
- Buy to close the PFE Aug Monthly (8/20) 51 Put for around $1.49
- Sell to open the PFE Aug Week Four (8/27) 51 Put for around $1.99
- Set your initial credit limit at $0.50, but adjust as needed to roll today
New Cash in Hand: $2.15
Expiration: After the close on Friday, Aug. 27
Potential Rate of Return: 4.2% in 18 days, or 85% annualized, if this option expires worthless
PHM Aug Monthly (8/20) 52.50 Put
Current Stock Price: $52.09
Cash in Hand: $0.65
Action:
- Buy to close the PHM Aug Monthly (8/20) 52.50 Put for around $0.85
- Sell to open the PHM Aug Week Four (8/27) 52 Put for around $1.07
- Set your initial credit limit at $0.22, but adjust as needed to roll today
New Cash in Hand: $0.87
Expiration: After the close on Friday, Aug. 27
Potential Rate of Return: 1.7% in 18 days, or 34% annualized, if this option expires worthless