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ULTA was down to a relatively cheap valuation ahead of its earnings report.
ULTA Salon, Cosmetics and Fragrances (ULTA) has been a raging success since coming public in October of 2007. However, the shares have been all over the place due to occasional excessive valuation levels.
ULTA hit an all-time peak of $132.70 in November 2013, putting the shares at more than 42x earnings for the FY due to end on Jan. 25, 2014. Since then the stock retreated by more than 28%. ULTA was sitting at about $85 just ahead of todays scheduled, after the close, earnings announcement.
Right before the close Market Shadows Virtual Put Writing Portfolio sold three contracts of the Jan. 2016, $80 puts at $12 per share.
We must now be ready to buy 300 shares of ULTA at a net price of $68 per share ($80 strike - $12 put premium).
Our best case result will be keeping the $3,600 in premium received. That will be the result if ULTA goes up, stays unchanged or even if the stock declines to no lower than $80 on the option's Jan. 15, 2016, expiration date.
Ulta is a good company. We feel good about these puts. ULTA shares have not been below $68 for even one day during the past 28 months.
Disclosure: Paul is short ULTA Jan. 2016, $80 puts in his personal account.
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