Monday, July 18, 2011

Sold 100% Cash-Secured Puts -- Mylan Inc.

Today, the Covered Calls Advisor decided to establish a new 100% Cash-Secured Puts position in Mylan Inc. (MYL) with an Aug2011 expiration.

Mylan Inc. is a leading manufacturer of generic pharmaceutical products
in finished tablet, capsule and powder dosage forms. MYL markets more than 1,000 products throughout the world with sales from: North America 53%, Europe
33%, and Asia/Pacific 14%. Generics account for about 90% of total revenues, with specialty products representing the balance. As patents continue to expire over the next few years for many successful branded drugs, Mylan is well-positioned to capture a significant share of new generics which bodes well for its future growth rate.

1. Mylan Inc. (MYL) -- New Position
The transaction was as follows:
07/18/2011 Sold 5 Mylan Inc. (MYL) Aug2011 $23.00 Put Options @ $1.06
Note: the price of MYL stock was $22.98 today when these puts were sold.

The Covered Calls Advisor does not use margin, so the detailed information on this position and some potential results shown below reflect the fact that this position was established using 100% cash securitization for the five put options sold. Two possible overall performance results(including commissions) for the Mylan Inc. (MYL) transaction would be as follows:
100% Cash-Secured Cost Basis: $11,500.00
= $23.00*500

Net Profit:
(a) Options Income: +$517.30
= ($1.06*500 shares) - $12.70 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If stock price unchanged at $22.98 and thus stock assigned at $23.00 at expiration): -$18.95
= ($22.98-$23.00)*500 - $8.95 commissions
(c) Capital Appreciation (If MYL stock above $23.00 at Aug2011 expiration): -$8.95
= ($23.00-$23.00) -$8.95 commissions

Total Net Profit(If stock price unchanged at $22.98): +$498.35
= (+$517.30 +$0.00 -$18.95)
Total Net Profit(If stock price above $23.00 at Aug2011 options expiration): +$508.35
= (+$517.30 +$0.00 -$8.95)

Absolute Return if Unchanged at $22.98: +4.0%
= +$498.35/$11,500.00
Annualized Return If Unchanged (ARIU): +47.9%
= (+$498.35/$11,500.00)*(365/33 days)

Absolute Return (If stock price above $23.00 at Aug2011 options expiration and put options thus expire worthless): +4.4%
= +$508.35/$11,500.00
Annualized Return (If stock price above $23.00 at expiration): +48.9%
= (+$508.35/$11,500.00)*(365/33 days)

No comments:

Post a Comment