Astute Millionaire – LUV Update #1

Market Context
Good day Millionaires,

First, I would like to thank all the students for a great turn out in our second class. Last night we discussed the closing of our put spread hedge in LUV and what steps are next. As mentioned, we are going to close out our put spread for a nice profit and use the proceeds to go out an buy more shares.

We will also be selling a call against our stock to bring in some cash and cut our cost.
Closing the Hedge
Closing out the put spread will bring in a net profit of roughly $1,200. Recall we bought the put spread for 0.95×10 contracts = $950. Now we are selling it for 2.19×10 contracts = $2,190.

$2,190-$950=$1,240 profit.

Buying more Shares
We will use the $1,200 (less commissions) profit to buy shares. At the time of this update, LUV is trading at $53.06. Taking the $1200/$53.06 = 23 shares.

Selling Calls
We are going to sell calls against our stock to bring in some premium and cut our cost.