How I trade a Long Term position starring Walter Energy

I entered a long stock position in $WLT on 9/26/2013 and have added Options pieces along the way. Here is the current status:

  • Long stock
  • Short the November 22 weekly 17 Calls
  • Long the December 17.5/14 Put Spread


One of the reasons that I could add this Put Spread for December was because I had collected some significant Option premium over the past 2 months. Now that I have some good distance from my entry it was time to add protection. The $14 lower Put strike was chosen because it is just under my initial entry. This Put Spread gives me $3.50 of protection until December expiration.

Being short the weekly Calls against the stock allows me to make an adjustment each week – since the Calls are covered – to build up more Option cushion.

Rinse. Repeat.

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