Options Rescue Strategy For Rolling Puts Down

Aflac stock continues to perform well and the recent downturn seems to have ended, at least for now. Aflac Stock trades on New York and its symbol is AFL. On Friday I bought to close my Aflac Stock April $48 puts for .11 cents which I had sold on Feb 26 for $1.05. This represented a capture of 89% of the return, but I wanted to free up my capital so I could sell 10 naked puts into May on Aflac Stock at the $49 strike for $0.71 cents to keep put premium flowing into my Aflac Stock trade. Therefore on Friday I sold 10 naked puts for May 16 options expiry for .71 cents.

The chance though of my holding these latest Aflac Stock naked puts into expiry is slim. If you review the past trades for Aflac Stock through this link, you can see that I am selling roughly 2 months ahead of the options expiry month and then closing often with 3 weeks still left. Basically I am trying to bring in the larger premium whenever possible, by going out 2 months with my Put Selling, but then as Aflac stock moves even sideways, that put premium erodes rapidly as the stock approaches 3 weeks to options expiry, as long Aflac stock has stayed above the naked put strike I have sold.

I am therefore aiming to try to bring in anywhere from 75% and up, of the put premium I am selling for, but I am closing early rather than holding pennies for the final weeks. For example the close on Friday March 28 of the April 20 $48 puts was just .11 cents. I cannot imagine holding .11 cents for another 3 weeks with $24,000 in capital sitting there to capture an additional 0.23% gain if that 11 cents expires worthless on April 19.

Instead I would rather pick up the extra premium on the Aflac Stock May $49 put strike and then aim to close that put strike hopefully before earnings are announced on or about April 24.

Aflac Stock Concerns

The concern I have for Aflac Stock is earnings itself. Analysts are expecting earnings of around $1.63 a share on $6.1 billion for the quarter. This would actually be a decline from $1.74 a share for the same quarter last year. If Aflac earns less per share than estimated the stock could quickly fall.

If I look at the 1 year daily Aflac stock chart below, $49 does not seem too out of line with support levels. But actually there is limited support at $49. Much stronger support is at $44.00 which is 10% below the $49 valuation.

Aflac Stock one year daily chart

Aflac Stock one year daily chart

Rescue Strategy In Advance

One of the reasons I have confidence when I am investing is because I am prepared at all times for the trade not to work out. Emergency crews are trained well in advance of any emergency event. This is a prime reason they are so good at their jobs. They have trained repeatedly for a day that they hope they will never been needed for. It is the same thing with investing no matter whether you are doing options or stock. Being prepared in advance assists in keeping a trade profitable and allowing you to exit with the least amount of damage. This is where history of a stock becomes important. Let’s take a look……

This FullyInformed Members strategy article discusses rolling naked puts in the event that a stock declines to keep the trade profitable and allow for an exit that leaves the original capital protected and unscathed. This article is 5 pages in length with 1500 words. FullyInformed Members can can login directly through this link to read the rest of this strategy article or Members can sign in to the full members site here. Non-members can join here.