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

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.