Tuesday, February 25, 2014
Established a 100% Cash-Secured Puts Position in Citigroup Inc.
Details of this transaction along with a potential return-on-investment result are:
Citigroup Inc. (C)
The transaction is as follows:
02/25/2013 Sold 6 Mar2014 $48.00 Puts @ $.94
Note: The price of Citigroup was $48.46 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 six Put options sold.
A possible overall performance result (including commissions) for this Citigroup Inc. transaction would be as follows:
100% Cash-Secured Cost Basis: $28,800.00 = $48.00*600
Note: the price of Citigroup was $48.46 when these Put options were sold.
(a) Options Income: +$550.55
= ($.94*600 shares) - $13.45 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If C remains above $48.00 at Mar2014 expiration): +$0.00
= ($48.00-$48.00)*600 shares
Total Net Profit (If C is above $48.00 strike price at Mar2014 options expiration):+$550.55
= (+$550.55 +$0.00 +$0.00)
Absolute Return (If C is above $48.00 at Mar2014 options expiration and Put options thus expire worthless): +1.9%
Annualized Return (If C above $48.00 at expiration): +26.8%
= (+$550.55/$28,800.00)*(365/26 days)
The downside 'breakeven price' at expiration is at $47.06 ($48.00 - $.94), which is 2.9% below the current market price of $48.46.
The 'crossover price' at expiration is $48.94 ($48.00 + $.94). This is the price above which it would have been more profitable to simply buy-and-hold Citigroup stock until Mar 21st (the Mar2014 options expiration date) rather than holding these short Put options.