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Author: AnotherBGFool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 214  
Subject: Re: WU Covered Straddle Date: 1/1/2012 3:18 PM
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Hi - I own 100 shares of WU at a $17.65 cost basis.

I'm new at this too, but have a basic understanding of selling put options.

In my case I sold 1 $18 WU February 2012 put option contract on 11/1/2011 and was paid $180 minus broker fees to do so.

If WU closes BELOW the $18 strike price when my option contract expires on the 3rd Friday in February 2012 I WILL BE obligated to purchase 100 shares of WU at $18 per share.

If WU closes ABOVE the $18 strike price when my option contract expires on the 3rd Friday in February 2012 I WILL NOT BE obligated to purchase 100 shares of WU.

In either case I get to keep the initial $180 premium I was paid when I sold the put option contract.

Here again is Jeff's recommendation ...

Western Union (NYSE: WU): Buy half an allocation in shares and sell to open a February 2012 $18 covered straddle (selling $18 puts and calls), lately for around $2.20.

Note that the recommendation tells you to open option contracts for the SAME month, in this case February 2012. In my case I sold a February 2012 $18 put option contract, then sold a May 2012 $18 call option contract.

So the twist in my case is that I did not do use the SAME month. I wanted to get $150 for the call option and found that I was able to accomplish this using the May 2012 call option contract.

So ... it looks like I have a covered straddle strategy in place but my puts and call options have different expiration months. So I'm not even sure this is a true covered straddle. I do know that I will have to wait longer for my covered calls options to reach expiration.
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