Thursday, September 25, 2014
Established a 100% Cash-Secured Puts Position in Google Inc.
Details of this transaction along with a potential return-on-investment result are:
Google Inc. (GOOG)
The transaction is as follows:
12/09/2014 Sold 1 Jan2015 $530.00 Put @ $18.20
Note: The price of Google was $522.64 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 one Put option sold.
A possible overall performance result (including commissions) for this Google transaction would be as follows:
100% Cash-Secured Cost Basis: $53,000.00
Note: the price of GOOG was $522.64 when the Put option was sold.
(a) Options Income: +$1,810.30
= ($18.20*100 shares) - $9.70 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If GOOG closes above $530.00 at Jan2015 expiration): +$0.00
= ($530.00-$530.00)*100 shares
Total Net Profit (If GOOG is above $530.00 strike price at Jan2015 options expiration): +$1,810.30
= (+$1,810.30 +$0.00 +$0.00)
Absolute Return (If GOOG is above $530.00 at Jan2015 options expiration and Put option thus expires worthless): +3.4%
Annualized Return (If GOOG is above $530.00 at expiration): +31.2%
= (+$1,810.30/$53,000.00)*(365/40 days)
The downside 'breakeven price' at expiration is at $511.80 ($530.00 - $18.20), which is 2.1% below the current market price of $522.64.
The 'crossover price' at expiration is $540.84 ($522.64 + $18.20). This is the price above which it would have been more profitable to simply buy-and-hold Google Inc. stock until December 16th (the Dec2015 options expiration date) rather than holding this short Put option.