Astute Millionaire – LUV Trade Update

Market Context
Good day Millionaires,

Thank you again for another great turnout in the class last night. As discussed, we will be closing out the put spread (hedge) in Southwest Airlines (LUV) and using the profits to buy more shares.

In addition, we are going to close out the short calls to avoid the stock possibly be taken if it just takes off like a rocket.

1 – closing out the put spread

2 – buying the calls back

3 – buying shares
The Trade
Closing out the 53-50 put spread for a 1.81 credit.

The Trade
Buying the short 58 calls back for 0.15 or less.

The Trade
Using the profits from just the put spread, to buy 17 ($880/50.61) more shares.

Risk & Reward
As illustrated below, we now have an additional 40 shares (for no out of pocket monies invested) and our average cost has now gone to 56.08 (we originally bought the shares @56.25).