Tuesday, August 27, 2013
Established a 100% Cash-Secured Puts Position in SanDisk Corporation
Details of this transaction along with a potential return-on-investment result are:
SanDisk Corporation (SNDK)
The transaction is as follows:
8/27/2013 Sold 2 Sep2013 $55.00 SNDK Puts @ $1.46
Note: The price of SNDK was $55.44 when this transaction was executed.
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 three Put options sold.
A possible overall performance results(including commissions) for this SanDisk transaction would be as follows:
100% Cash-Secured Cost Basis: $11,000.00 = $55.00*200
(a) Options Income: +$281.55
= ($1.46*200 shares) - $10.45 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If SNDK remains above $55.00 at Sep2013 expiration): +$0.00
= ($55.00-$55.00)*200 shares
Total Net Profit (If SNDK is above $55.00 strike price at Sep2013 options expiration): +$281.55
= (+$281.55 +$0.00 +$0.00)
Absolute Return (If SNDK is above $55.00 at Sep2013 options expiration and Put options thus expire worthless): +2.6%
Annualized Return (If SNDK above $55.00 at expiration): +35.9%
= (+$281.55/$11,000.00)*(365/26 days)
The downside 'breakeven price' at expiration is at $53.54 ($55.00 - $1.46), which is 3.4% below the current market price of $55.44.
The 'crossover price' at expiration is $56.90 ($55.44 + $1.46). This is the price above which it would have been more profitable to simply buy-and-hold SanDisk until Sep 20th (the Sep2013 options expiration date) rather than holding these short Put options.