This is a FullyInformed Members strategy article on rescuing deep in the money naked puts. The recent plunge in gold has left a lot of investors holding naked puts on gold miners that ended up deep in the money. Recently an investor wrote me regarding his Barrick Gold Stock (ABX) as he was left holding naked puts at $30 and $29 put strikes that were deep in the money. He rolled those puts into October but was wondering what I might suggest for handling these puts and getting his capital back working again.
Rescue Strategy For Deep In The Money ABX Stock Naked Puts
When puts have not been rolled down at the same time as the stock has fallen investors are often left holding naked puts that end up deep in the money. While many investors remain unworried and would accept shares in ABX Stock is assigned, often the better trade is to work those puts out of the trade to release the capital to get back to generating more income. As well many investors shy away from being assigned shares at $30 on a stock that has fallen to $20 and may have a long time recovering.
Deep In The Money Naked Puts Rescue On Coca Cola Stock
For example from 1998 to 2006 Coca Cola Stock was stuck in its own bear market which eventually saw the stock lose 56.9% of its value before rallying back. During that period I often had to implement rescue strategies as my puts often ended up deep in the money. While I was unconcerned about the drop in Coca Cola Stock as I was confidence that the stock would eventually recover, I saw no reason to accept being assigned shares at $80, $70, $60, or even $50 when my capital could be put too better use. Therefore a rescue strategy had to be used repeatedly throughout those 7 years to keep rolling my naked puts out of the trade and bringing my capital safely back to my portfolio for further investing.
There are many different strategies that can be used to rescue deep in the money naked puts. This strategy is not among the easiest to understand but it is simple to implement and once learned, an investor to adjust and alter it continually to suit their outlook, income needs and risk appetite.
Deep In The Money Naked Puts Rescue Strategy Article
This is a FullyInformed Members Rescue Strategy Article. It is 7 pages in length with 2700 words. This Rescue Strategy article looking at deep in the money naked puts can be directly accessed through this link or Members can login to the full site here. Non-members can join here.