My September ADI put was nearly worthless and with option expiration Friday being tomorrow, I decided to go ahead and roll my naked put to December and start over with it. While ADI was trading at $82.91, I sold bought to close my one ADI September $80 naked put for $0.02 and paid $2.29 including $0.29 in commission. At the same time, I sold to open one ADI December $80 naked put for $2.67 and received $266.70 after paying $0.30 in commission.
ADI can drop 6.73% and I’ll still take a full profit. As long as it stays above $80, I’ll earn 3.45% (13.48% annualized) based on the money I should keep in reserves in case of an assignment.
I received $284.30 from the sale of the September put when I sold it in July, which means I have a realized gain of $282.01 after paying to close it today. I didn’t have to buy back my September contract, but for only $2.30 it was worth it to avoid the risk of the market taking a nose dive while I have two contracts at the $80 strike. I never used to buy puts that were out of the money the week of expiration, but after being burned a few times, I decided a few bucks here and there is much better than a few hundred a couple of times per year.
You can see my YouTube trade video here: