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Strategies & Market Trends : Option Strategies
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To: Jim P. who wrote (1759)9/20/2016 3:03:50 PM
From: Jim P.   of 2591
 
Well, Potash trade in the red.
Options expired on Friday so basis now about $17.30
Sold covered calls with a 9/30 expiration or less than 2 weeks for 20 cents and a strike of $16.50
Sold cash covered puts for 9/30 with a strike of $16 for 29 cents for 1/2 of the amount of the covered call position.
Basis will be lowered to a blended $16.65 so risk of 6 weeks of lost option premium to bring down the basis and increase of my position by 1/3 if it is below $16.00

If the stock is above $16 in 2 weeks then my basis is $16.95 and if above $16.50 then I will have lost 45 cents on the combined trades.

I think 2 weeks to lower the breakeven of the trade is a good choice for me here. It will make the $17 strike profitable for covered call writing or possibly use the $16.50 strike to bring basis down below that number in another 2 weeks.

I like the proposed merger combination and for the longer term will own some of the combined company if the merger goes through.
jim

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