Short strangle on MPW stock (Recovery trade after getting assigned put option at $7)
On March 13, I got assigned 100 shares with MPW stock at 7. A position I originally started back in July 2023.
My loss before options income form the position is $260, but as I have made options premium of $115, my actual break even price is $5.85.
As I’m unable to sell above my current break-even price to receive enough premium, I decided to sell a covered call option near the strike price + sell an additional put option for additional premium - forming the so-called short strangle
MPW stock is also part of our long-term dividend stock portfolio, currently, we are holding already 108 shares, with an average buy price of 6.96 per share. At the curendt dividend payment this stock generates about $55.08 yearly dividend for our stock portfolio.
This is not trading advice. Investments in stocks, funds, bonds, or cryptos are risk investments and you could lose some or all of your money. Do your due diligence before investing in any kind of asset.
here is the trade setup:
Assigned 100 MPW shares at 7.00 USD
SLD 1 MPW May17'24 5.5 CALL 025
SLD 1 MPW May17’24 3 Put 0.19
What happens next?
On the expiry date, May 17, 2024, MPW is trading under $5.5 but above $3 per share - options expire worthlessly and I keep premium - if MPW trades under $3 on the expiry date, I risk getting assigned an additional 100 shares and will have to buy them paying $300. If so I will hold already 200 shares with MPW, but my average buy price will be $5. Plus additional options premium of $1.15 will offset my average buy price to $4.42. Already better.
In case MPW trades above $5.5, I risk my 100 shares getting called away and book an actual loss from the position of $150. But again as I have made options income so far of $115 from this position. I will book a small loss of $35. Acceptable!
Anyhow, if any of the sides will get challenged - I will try to adjust them by rolling out, hopefully forward for a credit.
In total: 13 trades since July 6, 2023
Options premium: $115
Shares 108 / Average buy price: $6.97
Target price for selling: $10