Options trades: Frontline (FRO) and Aflac (AFL)
I made the following options trades recently as further defensive moves in my portfolio:
AFLAC [[AFL]] – Early last week as AFL dropped into the low teens I rolled over my short put options position by buying back the August 25-strike put options I was short and selling some January 2010 12.5-strike puts for a small net credit:
AFL is extremely oversold here, but perhaps has finally found some support in the $10-$15 range. The next lower levels of support appear to be at about $9, and then $6 – levels last seen during the mid 1990s. If in the coming days and weeks the stock can stabilize here, the technical picture could turn quite positive.
By rolling over my original put option position in AFL and selling the time premium available on the January 2010 12.5-strike LEAPS puts I was able to both reduce my total risk exposure in the position and establish a much more favorable net cost basis (between $7 and $8 per share) if I’m ultimately put the stock.
Frontline [[FRO]] – I also recently rolled over my short put options position in FRO by buying back the May 35-strike put options I was short and selling some January 2011 20-strike puts for a small net loss:
FRO continues to move lower and appears to have further to go on the downside. Downside support levels appear to be about $15, $12-$13, $10 and about $7.
By rolling over my original put option position in FRO and selling the time premium available on the January 2011 20-strike LEAPS puts I dramatically reduced my total risk exposure in the position and lowered my net cost basis to between $10 and $15 per share if I’m ultimately put the stock.
