Daily Market Update – March 13, 2015 (8:45 AM)
The Week in Review will be posted by 6 PM and the Weekend Update will be posted by Noon on Sunday.
The following trade outcomes are possible today:
Assignments: SNDK, UAL
Expirations: CHK, GDX, HAL, KO
The following were ex-dividend this week: NEM (3/10 $0.02), KO (3/12 $0.33), GME (3/13 $0.36)
The following will be ex-dividend next week: LVS (3/19 $0.65)
Trades, if any, will be attempted to be made by 3:30 PM.
Note: Just a word about the rollover trade in GameStop late yesterday afternoon.
Shares go ex-dividend tomorrow for $0.36 and the option contract had a week to run. Further, the company reports earnings during the first week of the April 2015 cycle.
With shares trading about $0.44 above the threshold price for early assignment, the fact that a week still remained and that there could be some speculative trading in the days before earnings on March 26th, there was a chance the the $39 strikes wouldn’t be assigned early.
However, I wanted to do something to at least be able to get part of that dividend, especially since the position was more than 3 months old and I felt like I “deserved” the dividend.
The way to do that was by rolling shares over from $39 to $39.50 and using the same expiration date. Doing so incurred an ND of $0.27 in exchange for an additional $0.50 in the strike, which yields a net $0.23.
That’s the case if the shares are assigned early tonight.
With shares closing at $39.79 the chances of the March 20 $39.50 strikes being assigned early is very small, but there still remains a fair chance that the $39 strikes will face early assignment.
If neither the $39 nor $39.50 options are exercised early you also get to keep the dividend.
However, if you were able to roll over to the $39.50, then, based on the trading of shares subsequently, you can make the decision to rollover again, but this time, maybe even back down to $39 in order to get some additional premium to offset the reduction in strike price, in order that there is a better chance of getting out of the position prior to earnings.