Wednesday, April 29, 2015
Established New Short 100% Cash-Secured Puts Position in Hertz Global Holdings Inc.
The transaction and a potential return-on-investment result is:
1. Hertz Global Holdings Inc. (HTZ) -- New Position
The transaction was as follows:
04/29/2015 Sold 4 Hertz Global Holdings Inc. May2015 $21.00 Puts @ $.65
Note: The price of HTZ was $20.84 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 four Put options sold.
A possible overall performance result (including commissions) for this transaction would be as follows:
100% Cash-Secured Cost Basis: $8,400.00
Note: the price of HTZ was $20.84 when these Put options were sold.
(a) Options Income: +$248.05
= ($.65*400 shares) - $11.95 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If HTZ is above $21.00 strike price at May2015 expiration): +$0.00
= ($21.00-$21.00)*400 shares
Total Net Profit (If HTZ is above $21.00 strike price at May2015 options expiration): +$248.05
= (+$248.05 +$0.00 +$0.00)
Absolute Return (If HTZ is above $21.00 strike price at May2015 options expiration): +3.0%
Annualized Return (If HTZ is above $20.00 at expiration): +59.9%
= (+$248.05/$8,400.00)*(365/18 days)
The downside 'breakeven price' at expiration is at $20.35 ($21.00 - $.65), which is 2.4% below the current market price of $20.84.
The 'crossover price' at expiration is $21.49 ($20.84 + $.65). This is the price above which it would have been more profitable to simply buy-and-hold HTZ until May 15th (the May2015 options expiration date) rather than selling these Put options.