I have been playing around with weekly options lately and decided to do an experiment today. I was originally going to do a Cash Secured Put trade on Campbell Soup Co (CPB) at about my normal 28 to 30 day timeframe. Would have paid me about $600.00 at the $41.00 strike price. Instead, I sold the 8 day $41.00 strike for $362.00. CPB will announce their earnings next Thursday, which has made the volatility higher. Last time, the company’s poor earnings caused the stock to drop.
SInce CPB is a stock I want to own long term, I was willing to make the trade at this price level. Doing it this way would allow me to do three more weekly trades in place of the original single trade, theoretically earning more premium to make up for any losses incurred after the earnings are announced. Obviously there are risks, such as getting put the shares with CPB trading well below $41.00.
Here is the trade:
- Sold: Ten (10) Sept 1, 2023 Puts at $0.362
- Strike Price: $41.00
- *Premium Collected: $362.00
If I am forced to buy the 1000 shares, my entry price for CPB would be *$40.64, which is below its 52-week low and a 32% discount to Campbell’s $61.00 Morningstar Fair Value estimate. CPB also pays a 3.27% dividend that I will start collecting in early October 2023 if I am put the shares.
I have doubts about trading for such a short period, but I wanted to give it a chance due to the elevated premium.
*Excludes transaction costs.
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