Yesterday, 8/24/10, I BTC 1 BP Oct10 49 Put and STO 1 Jan12 47.50 Put for a net deposit of $140.43 in my taxable account.  My basis for these BP shares, if put to me, would now be 44.93, excluding trading costs.  These transactions represent a simple return of about 2.69% and an annualized return of about 1.99%.  The annualized return is lower because the new option expires more than 1 year out.

The gulf well is not longer leaking and there is increasing evidence that the free oil that may still be in the gulf is being taking of by natural action.  There is apparently a stipulation that anybody that accepts payments from the $20 Billion fund that BP is funding will need to agree that they will not sue BP for additional damages.  All-in-all, I think BP is in a much better position now than when I originally sold the Oct Puts.

With all that, BP is currently falling along with the rest of the market and the oil stocks.  Compounding the problem is the continuing build in the oil supply with a resulting decrease in the price of a barrel of oil.

I still believe my original thesis is correct.  However, with BP continuing to trade lower, I decided to roll out and down the Oct10 BP Put I previously sold.  Doing these trades allows me to bank an additional $140.93 and reduce my potential basis by a combined total of $2.90 per share.  I suspect that at some time, well before Jan12, I will be able to buy back the Jan12 Put and sell something with a shorter time frame although at a higher strike price.