Sold New MON Naked Put to Create an Options Strangle

Monsanto (MON) beat earnings last week and rocketed up nearly 20% in one day last week.  It slowly started to creep back down as the short covering slowed and the profit taking for the longs picked up.  I entered a limit order on Friday the 9th in the morning when MON was trading just over $83 to sell a new naked put at a much lower strike than MON was trading at the time.

While MON was trading at $79.69 I sold to open one MON February 70 naked put (MONNN) for $2.50 and received $239.25 after commissions.   This goes along with my MON covered call I sold at the end of December at the February 80 strike.  This creates a strangle for me on MON since I’ve sold calls and puts on MON at the same expiration, but at different strikes.  Ideally MON will close between $70 and $80 at February expiration and I take the full profit on both options.  Since I also own 100 shares I’d prefer that MON close in the high $70s, but if it does close below $70, my average cost will come down significantly.  My original 100 shares came from a naked put I sold at the $100 strike.  With such high volatility in MON and with their earnings still proving to be strong I will be happy to own 200 shares and continue to write covered calls each month.  If MON closes above $80 and my shares are assigned I’ll be happy I grabbed an extra $239.25 from the MONNN naked puts.  That’ll close my series of MON trades with an overall profit, even with the $2000 loss on the underlying stock.