Rolled forward and down 1 Put on MS Stock – 1.7% potential income return in 79 days
On January 16, 2024, I rolled forward and down 1 put option on Morgan Stanley stock (NYSE: MS) buying back strike price of $88 and, and selling new put with strike price $87 with expiry on February 2, 2024. For this trade setup, I was rewarded with $0.43 (after commissions).
Also, I bought 2 additional share with Morgan Stanley for our long-term dividend stock portfolio, currently, we are holding already 10 shares, with an average buy price of 87.2 per share. Morgan Stanley is a dividend-paying stock and at the moment generates about $28.9 yearly dividend for our stock portfolio.
My plan is to acquire 1 Morgan Stanley share every week until we reach 100 shares and will start selling covered calls. Meanwhile, selling puts and dollar cost averaging.
90 shares to go.
This is not trading advice. Investments in stocks, funds, bonds, or cryptos are risk investments and you could lose some or all of your money. Do your due diligence before investing in any kind of asset.
here is the trade setup:
BOT 1 MS Jan19'24 88 PUT 2.02
SLD 1 MS Feb02'24 87 PUT 2.46
What happens next?
On the expiry date, February 2, 2024, MS is trading above $87 per share - options expire worthlessly and I keep premium - if MS trades under $87 on the expiry date, I risk getting assigned 100 shares and will have to buy them paying $8,700
As I already have collected a premium of $1.48 per share, my break-even price for this trade is $87-$1.48= $85.52
In case of an assignment, I will turn this trade into a wheel strategy and will start selling covered calls.
Anyhow, if troubled with the strike price near the expiry, I will try to roll it forward and down, preferably for credit, before actually taking the stock assignment
In total: 20 trades since November 15, 2023
Options premium: $148
Shares 8 / Average buy price: $86.41
Target price for selling: $100