Extending CSCO

As I mentioned this morning, I was looking at extending the naked CSCO puts that should expire worthless tomorrow. I ended up selling two January 16 puts this afternoon. As you might remember, I sold these exact same puts 6 months ago so the model portfolio now has 4 open contracts on CSCO for January. That's probably more than I should have in one position, but it's a safe enough trade that I'll go ahead and do it. If these options end up expiring in January(as I expect them to) I will drop back to just 2 contracts.

I did not close the November puts. They are far enough out of the money that I'm not worried about them being assigned and it's one less commission I have to pay.

• Sell to Open: 2 CSCO Jan 21 2012 16.0 Puts @ $0.32

This brings the total premium I've received on this trade to $2.09. If/when I get assigned the stock, my effective entry price will be $13.91. That's almost 25% below the current price and would have a dividend yield of 1.7%. Owning Cisco at those prices would be a fantastic outcome in almost any scenario.

The Numbers

• Cash: +$64
• Short Option: -$64
• Margin: -$380