Time To Roll

Time To Roll Hello Smart Option Sellers! I hope everyone enjoyed the holiday and day off yesterday. I appreciate all the nice notes that were sent my way. Thank you! But today it's back to business (unfortunately!) and we need to make an adjustment to one of our positions. We're going to make another "roll" to help us lower our risk and potential cost-basis. Alcoa (AA) We currently have a January 2019 put-sell position in AA that has fallen below the $28 strike price. AA stock is currently near $25.30 at the moment. Before implementing a roll trade, one of the questions that is needed to be asked is: if I were to be forced to buy the stock now and immediately be underwater on it, would I be ok holding it and just waiting for it to rally back? If we were to hold our AA put-sell through the January 2019 expiration and the stock stayed below $28, would we feel ok holding a small paper loss? Or what if the stock bounced back above $28 before the expiration allowing us to sidestep having to roll? These are the decisions that have to be made once the stock moves below the strike price. Considering the weakness we've been seeing, and with the possibility that it could continue, it makes sense at this time to employ the roll. Here's what we're going to do: Please read through all of these instructions before entering the trades. Buy back (buy-to-close) all of the AA January 18, 2019 $28 put options as a closing transaction (buy-to-close). And... Sell (sell-to-open) the AA July 19, 2019 $25 put options as an opening transaction (sell-to-open). You'll notice that I didn't put any prices on each option trade. Here's why: Currently, the January 2019 $28 put option is worth about $3.40 per contract. The July 2019 $25 put option is currently worth about $3.55 per contract. We want to make sure to sell the July put option for more than what we'll pay to buy back the January put option. This way, you'll come away with an overall small credit between the two trades. Here's how you will execute this two-part transaction: If you feel comfortable in doing this, and you can ask your broker for help, you can execute both trades in one single transaction called a "diagonal options spread". This way, you can specify a