LEG has dropped significantly below our put strike price of $12.50 and as a result the Portfolio for the Ages has already been assigned three put contracts yesterday and the remaining three put contracts today. The three covered call contracts with a $12.50 strike price will undoubtedly expire worthless at market close on Friday.
Set up an order to submit for execution at market open on Monday the trade below.
Selling to Open: 9 September 18, 2026 $12.50 Call Options [Symbol: LEG260918C12.5]
Limit Order Price: Credit of $0.45 per share
Personally, I did not wait for the covered calls to expire worthless on Friday to sell new call contracts on all 900 shares now held in the account. I have a margin account and am not worried about the remote possibility that LEG will climb 25% in two days, triggering the assignment on Friday of 300 shares that I am using to cover new calls that won’t expire for another 184 days.
I received $0.47 per share or $419.26 after commissions.
What Happened?
It helps to look at a timeline.
- 2026-02-04: We sold 6 LEG260320P12.5 for $0.60 per share and collected $357.51. LEG reached a daily high of $13.00 and closed at $12.87.
- 2026-02-12: LEG reported CY2025 EPS of $1.05, equal to CY2024 EPS all the while deleveraging considerably. This was the first time since CY2021 that the EPS was not a decline over the prior year. Of course, the market did not care, and LEG sold off and hit a low of $11.18 on that day before closing at $11.45.
- 2026-02-27: LEG closed at $11.68
- 2026-02-28: The United States of America attacked Iran and the war is still ongoing.
- 2026-03-18: LEG has sold off with the rest of the market, closing lower 10 of the last 12 trading days and likely to do so yet again as it sits at $10.05 as of the time of this writing.
Because we collected $0.60 on the $12.50 puts, our effective breakeven was roughly $11.90. Under normal circumstances, there was a reasonable chance LEG would have been trading above that level by the 2026‑03‑20 expiry. Instead, the stock slid to $10.05, turning the put sale into an unrealized loss of $1.85 per share — a total of .
No rational investor would have penciled in this outcome. Yes, the market wanted more from LEG’s earnings report, but markets can be short‑sighted and overly reactive. The 23% drop from the recent $13.00 high to the $10.00 area feels like a two‑part story: roughly one-third attributable to the market’s unrealistic expectations, and the remaining two-thirds tied to geopolitical decisions far outside any investor’s control.
Both forces are completely external to the trade — and completely outside my influence.
Going to the Mattresses
Rather than close out the puts and realize the loss, we are taking assignment and will claw our way back to profitability by collecting call premiums and dividends.
What’s important here is that the average cost per share right after the dividend is paid on 2026-09-15 will be $11.90. That’s under the $12.00 initial offer price made by Somnigroup International Inc. [SGI] earlier this year.
So even if LEG doesn’t make it all the way up to $12.50 in the next 184 days, perhaps they end up agreeing to the $12.00 offer price after all. That means the position would close at a small profit. And even if the offer isn’t what drives the share price going forward, LEG sold as high as $11.90 less than a month ago. It could easily get there again by other means.
If LEG doesn’t budge and trades at $10.05 on 2026-09-18, we will simply write more covered calls, lowering our average cost per share until one day, it falls below the current price of LEG.
Trading near $10, the $0.05 quarterly dividend yields 2%. But if one can add $0.45 in call option premium every six months, we have an 11% effective yield. That means that even if LEG’s share price doesn’t budge from here, we can be out of this position in two years.
I had hoped it would be in two days.