Saturday, 6 February 2016

Options Trades

On February 5, Vodafone temporarily dipped below $30. I was surprised because their recent results were good, several firms have reiterated buys on the stock and they have restarted talks with Liberty Global. Since I already own 100 shares @ $30.00 each, I decided to sell a put instead of buying additional shares outright.

Sold 1 VOD Put July 15 '16 $30 Put @ 2.55 ($11.20 commission + $0.01 SEC fee)
Days Held (sell date to expiry): 160
Net Premium: $243.79
Annualized Return = ($243.79 / ($3,000 - $243.79)) * 365/160 = 20.1%


In my opinion, other companies who's share price does not reflect good financial results include GILD ($85) and GM ($28.50).

2 comments:

  1. Why are you selling 1 PUT instead of just purchasing additional shares of VOD if you believe the share price will increase. Sorry newbie question. Is it because of the capital involved and its availability (or not willing to lock down the money on VOD, but still play the bets). Thanks

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    Replies
    1. Hey Richard,

      There are two reasons. If I'm to own more VOD, I want to lower my cost basis. So if this put is assigned, my cost basis for 200 shares becomes $28.79. And if it doesn't get assigned, I get to keep $243.79. I feel comfortable with both outcomes.

      The second reason is I have a lot of CAD cash but not much USD cash. And converting CAD to USD costs me about 1.40. So that's out of the question.

      ADY

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