Below is a snapshot of the VLO current position on May 22nd 2012 at 4pm. Close price is $22.06.
REALISED GAIN/LOSS *
Closed position : Long 6 VLO Sept 2012 Puts strike $26 : bought $3.70, sold $2.44 = -$756 (loss)
(* including commissions)
Open position : Long VLO 600 shares : price is 22.06 = -$1482 (loss)
Open position : Long 6 VLO Sept 2012 Puts strike $29 : bought $3.95, price is $7.3 = +$1675 (gain)
(* including commissions and assuming worst case option prices)
Total gain / loss : -$563 or 3.8% (managable)
For comparision “Buy and hold” is would be down 10.06% (or -$1482), with no cash on hand.
This means the strategy is currently down “only” 3.8% (not great), however we if sold out the put at current prices we would have $1675-756 = $919 cash. Not enough to buy 100shares yet, but we could sell a single put contract or just buy 40 shares (at current prices).