Last week The Motley Fool recommended Redfin, the digital real estate agency, (RDFN). Instead of buying shares, I sold a put option with an October 16, 2020 expiration and $43 strike price (14% below the market price). Unfortunately, the market has continued to fall significantly and RDFN have fallen more than the market.
To improve the exposure that I hastily assumed, I sold another RDFN put with a November 20, 2020 and a $40 strike on Friday and closed the original position today. Our position is now an additional month in duration but only $4,000 is exposed to RDFN’s fluctuations. The new option position was sold for $314.30; the original position was sold for $134.30 and repurchased for $225.69. Effectively we have received $222.91 for selling the two options, less the repurchase of the original position.
RDFN performance June-September 2020. Source: Marketwatch.com accessed September 21, 2020, 3:30PM.