The order was sitting for a while and today I finally got filled. I'm cost-averaging down Lumber from 240 and now at 220. I will continue to average every 20 puts with intension of going long. Selling puts are great when you inted to go long if assigned. If not assigned, you're ultimately 'getting paid' to try to get in. A few things can happen:
1. If LB closes above 240 by the end of Feb, both positions (240 and 220 puts) expire worthless, I collect all the premium of appx. $1500.
2. If LB closes between 220 and 240, I will get assigned on the 240 puts (long from 240) and 220 will expire worthless. I need to roll-over 1 contract to June (I need to double check the next month). Since I still collect all the premium, it's as if I'm long from 228 (240 - $1500 / 110($/pt)).
3. If LB closes below 220, I will have two futures poistions with average price of 230. I will roll 2 contracts to the next month contract. Since I still collect all the premium, it's as if I'm long from 223 (230 - $1500 / 110($/pt) /2).
Let's see how it turns out.
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