This will be my last alert regarding the positions from the Six-Figure Portfolio Club. I will be providing my thoughts on each position and how you can manage them on your own going forward. However, if you have questions or need help, please contact me at [email protected].
I am recommending we roll our CVS Health (CVS) call out to the June monthly expiration to lower our cost basis on shares. If the stock is trading above the 62.50 strike price of the call on June 19, you can choose to allow shares to be called away at a loss, or you can continue to roll to reduce your cost basis until you have a profitable position. If CVS is below $62.50 heading into expiration, you can watch the call expire worthless and sell a new call on shares the following week to continue the position, or you may decide to walk away at that time by selling your shares.
The short leg of our Microsoft (MSFT) LEAPS call spread expires today, and I am recommending we roll it out to September, as I do not believe the market and MSFT are going to hold at current levels. This roll will dramatically reduce the cost basis.
Our Netflix (NFLX) put spread is well out of the money, and we have a small net debit on the position. I am recommending one more spread, which will turn that net debit into a profit should the new spread expire worthless. The new spread is nearly 15% out of the money, so the chances it will are good. But if NFLX experiences a sharp drop, you should roll the spread if you do not want to accept shares.
Finally, we have a Roku (ROKU) spread that does not expire until May 22. The stock is trading right around the strike price of our short put. With a week to expiration, it’s still possible this spread will expire worthless. But if shares are below $115 heading into expiration next week, plan to roll each leg of the spread down $15-$20.
If may be helpful to review the SFPC Coaching Session: Advanced Tactics video as you look to manage the spread trades.
Thank you for joining me for Six-Figure Portfolio Club. I hope you have learned a number of tactics that you can use going forward. And please do not hesitate to reach out to me at [email protected] if you have questions.
CVS May Monthly (5/15) 62.50 Call
Current Stock Price: $62.48
Cost Basis: $68.03
- Buy to close the CVS May Monthly (5/15) 62.50 Call for around $0.30
- Sell to open the CVS Jun Monthly (6/19) 62.50 Call for around $2.55
- Set your initial credit limit at $2.25, but adjust as needed to roll today
New Cost Basis: $65.78
MSFT Jan 2021 (1/15/21) 125/May Monthly (5/15) 155 Call Spread
Current Stock Price: $178.85
Cost Basis: $39.39
- Buy to close the MSFT May Monthly (5/15) 155 Call for around $23.70
- Sell to open the MSFT Sep Monthly (9/18) 155 Call for around $29.60
- Set your initial credit limit at $5.90, but adjust as needed to roll today
New Cost Basis: $33.49
NFLX May Monthly (5/15) 375/365 Bull Put Spread
Current Stock Price: $440.51
Net Debit: $0.36
- Buy to close the NFLX May Monthly (5/15) 375 Put for around $0.01
- Allow the NFLX May Monthly (5/15) 365 Put to expire worthless
- Sell to open the NFLX Jun Monthly (6/19) 375 Put for around $4
- Buy to open the NFLX Jun Monthly (6/19) 365 Put for around $3
- Set your initial credit limit at $1, but adjust as needed to enter today
New Cash in Hand: $0.63
ROKU May Week Four (5/22) 115/110 Put Spread
Current Stock Price: $114.92
Net Debit: $2.54
Action: No action is needed at this time