Ignore the News, Trade When Good Quality is on Sale
By Paul Price of Market Shadows
Coach (COH) beat fiscal Q1 numbers by a penny a share.
The stock dropped about $4 per share on the opening, allowing us to sell 1 January 2015, $50 put for $6.50 per share.
We’re committing to buying 100 shares of COH if the stock is trading below $50 at 4 PM on Friday January 16, 2015, the last trading day before the official expiration date. Our ‘if put’ price becomes $50 (the strike price) minus $6.50 (the put premium) = $43.50 per share.
In the latest year Coach posted all-time record sales, pays a higher dividend than ever before and showed the best EPS in its history. The break-even price on our put would result in entering this trade below any price at which COH actually changed hands during the entire past three years.
It has been much higher on numerous occasions but never lower in more than 36 months.
Our maximum profit is the $650 collected upfront. Any close at $50 or better will deliver this best-case result.
See full accounting for all previously closed-out puts and currently held trades by clicking the link below.
Virtual Put Writing Portfolio Details
The new position has been added to our open trade list.
The opinions expressed are those of Market Shadows and the author, not those of the Wall Street Examiner. The Wall Street Examiner provides market commentary content for Market Shadows without compensation at this time but with the expectation of possible future consideration. The Wall Street Examiner does not participate in stock or options selection or strategy recommendations for Market Shadows and makes no representation regarding the accuracy or validity of the ideas expressed in the post. No recommendation or endorsement is intended or implied. This post is presented for informational purposes. Do all necessary due diligence before considering any investment.
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