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25july - been over 2months since this trade was shown on air, lets see how it looks with weeks to go to aug opex.. stock is at 31ish now and the put would be closed at about $5.75..so about a $300 paper loss if you followed this trade. with no action by you , you will get "put the stock" at effective price of $34.30 if it does not rebound.
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2may - mike khouw has a trade for the short options action segment on fast money tonight. here is the video video clip
Sell the Aug 37 put for $2.70
mike says that will yield 7% to maturity. ok now the information he did not say. first off this is not a free trade, you will need to have about $3700 in margin/buying power for each put you sell, this will be set aside in your account to cover if you have to buy the stock (get put the stock) at 37 at opex. yes you keep the $270 and are effectively long at 34.30.. that $3700 will be unavailable until you close out that put. If thats your idea of a good use of $3700 for 4 months to make $270 in Aug then knock yourself out. If the stock rises for whatever reason, the put decreases in value some along the way, so profit to you.. but again are you trying to just make $100-$200 on a decrease in put value? what if the stock goes down in the meantime.. that Put goes up (paper loss to you).. and you still have to have that margin set aside.so your not making anything, just working on that time decay for the option.
Instead, if you absolutely had to commit $3700 to this stock, go ahead and buy the common at $38.15 after hours and also sell a June 39 covered call for $135. This gives you an upside of $40.35 which is about $200 above where it is now. When June Opex is complete, sell a July covered call, then an Aug covered call after that. I think these monthly covered calls will bring in more than just that one Aug put sale. I see FCX pays a dividend so you will get one of those payments as well.
Just hard for me to rationalize setting aside $3700 to make 7% that way. but thats just me, i would look to use that $3700 in buying power elsewhere
