Rolled Forward and Down Put Option on XOM – 1.37% potential income return in 63 days

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On August 19, 2021, I rolled forward and rolled down a put option I established just a week ago on XOM stock

Covered Calls with Reinis Fischer
Sold 1 Put Option on XOM – 0.96% potential income return in 8 days
On August 12, 2021, I sold 1 put option on XOM stock with an expiry set in the next 8 days. For this trade, I got a premium of $54.6 (after commissions) Exxon Mobil Corporation, stylized as ExxonMobil, is an American multinational oil and gas corporation headquartered in Irving, Texas. It is the largest direct descendant of John D. Rockefeller's Standard……
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18 days ago · Reinis Fischer

As the stock price of XOM failed through the roof and was well under my strike price, I decided not to take an assignment, but instead roll this trade forward, while lowering my strike price.

Here is the trade setup:

  • BOT 1 XOM AUG 20 '21 56.5 Put Option 3.12 USD

  • SLD 1 XOM OCT 15 '21 55 Put Option 3.38 USD

Here I bought back 1 put option with the strike prices of $56.5, for which I paid $312, and sold 1 new put option with a lower strike price and with an expiry set in October. For this trade, I got $338 (before commissions)

I did 2 things - lowered the strike prices from $56.5 to $55; rolled for a credit

What happens next?

On the expiry date, October 15, 2021, XOM is trading above $55 per share -  options expire worthlessly and I keep premium - if XOM trades under $55 on the expiry date, I will get assigned 100 shares

But as I already have collected a premium of $0.75 per share, my break-even price for this trade then will be $55-$0.75 = $54.25

In case of assignment, I will turn this trade into a wheel strategy and will start selling covered calls.

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