A Roll-Out: Extended our maturity, took in cash and lowered our break-even.
By Paul Price of Market Shadows
Back on January 9, 2013 we thought agricultural product manufacturer Mosaic (MOS) looked like a good bet to go up. The shares were trading at $59.36.
Our Virtual Put Writing Portfolio sold one contract of the January 2014, $60 put for $7.50 per share giving us a break-even of $52.50. Last summer’s big disruption in the fertilizer market turned this into a bad trade so far.
MOS was quoted at $47.73 as of 10:22 AM today. We are still confident in the company’s long term prospects. We’ll need more time for Mosaic to exceed our $60 strike price target, though.
We bought to close (BTC) today for $12.35 per share which cancelled out this week’s option deadline. We rolled out to a Jan. 15, 2016, $60 strike at a premium of $1,600 per share.
Our obligation remains exactly the same as before. We must stand ready to buy 100 shares of Mosaic for a nominal price of $60 if the put is eventually exercised. The original trade was closed for a loss of $485 ($750 received – $1,235 paid out). That will now be accounted for as on our closed-out transactions list.
Our newly initiated trade brought in enough to cover the full cost of the close-out transaction plus $365.
The ‘if exercised’ price has dropped from $52.50 to $44.00 due to the higher put premium this time around.
Our 2016 option is now reflected on the put Selling Portfolio’s ‘open positions’ list.
Check back over the weekend to see full details on all our option writing activities. We have a bunch of expirations due this week that will be tallied up after the close on Friday.
To see where our full profit and loss statement stands right now click here.
