Monday, 15 June 2015

Options Trade - Suncor

I hold 200 shares of SU with and average price of $39.97. Shares are currently trading at $34.20, which leaves me with a 14% loss (on paper). Seems like an opportunity for averaging down or making some $$$ with a put option.

I came close to adding 100 shares of SU today but given that my portfolio is 17% in Energy, I don't want to increase my position too much in this sector...unless the price is a super deal. So I'm thinking SU at $32 would be a great deal.

On June 15, I sold a put in SU. The trade:

Sold 1 SU Put Dec 18 '15 $35 Put @ 3.15 ($11.20 commission)

Days Held (sell date to expiry): 186

Net Premium: $303.80

Annualized Return = ($303.80 / ($3,500 - $303.80)) * 365/186 = 18.7%

The most likely outcomes of this trade are:

1. Shares are trading above $35.00 at expiration. I will get to keep $303.80 in net premiums.

2. SU is trading below $35.00 at or before expiration and shares are assigned. I will receive 100 shares of SU at a net cost of $31.96/share.

3. Should the share price rise, I may BTC my put option. I did that with SU earlier this year, resulting in a 24.7% annualized return:

Apr/21/2015 BTC 1 SU Jun 19 '15 $36 Put @ 0.50 ($11.20 commission)

Dec/01/2014 Sold 1 SU Jun 19 '15 $36 Put @ 3.40 ($11.20 commission)Profit: $267.60

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