We bought three June 40 puts @ 2.35 to hedge 300 shares of stock whose cost basis is 42.01. This is a gentle backspread, and because the puts have a delta value of about 35, our position nets out to the equivalent of being long 200 shares. If SLW continues higher the puts will shed deltas, making us “less short.” We’ll look to reduce our premium exposure on any weakness by shorting puts of another strike, but for now do nothing further. The stock is still not out of the woods, by the way, and we might still see a foot-fake down to 41.40 before SLW turns sharply higher. To make this possibility more interesting for newbies, I’ll suggest bidding 41.45 for 200 shares, no stop.
