Booked Two Gains, Started A New Position

Two Early Close-Outs & One New Put Sale

By Dr. Paul Price of Market Shadows

Our Virtual Put Writing Portfolio made a few moves this morning. We bought to close our single contracts of the Jan. 2015, Walgreen’s (WAG) $45 and our ExxonMobil (XOM) Jan. 2015, $85 put. We are still short one contract of the XOM Jan. 2016, $85 put.

The closing prices were low enough to make waiting another seven plus months look pretty silly. We spent just $11 on the Walgreen’s closure and $85 for the XOM contract. Both stocks are well above their respective strike prices.

Market Shadows sold the WAG put on Jun. 25, 2013, for $715 when the stock was trading for $44.56. Our net profit was $704.

We shorted the XOM put on Oct. 3, 2013, when ExxonMobil was quoted at $85.37. Puts that were ‘at the money’ back then brought in $815. Our net gain is thus $730. We’ve eliminated an unlikely, but potential $8,500 outlay obligation.

The $1,434 profits from these two trades bump our Put Writing Portfolio’s cumulative net gain to $19,468 on all 36 transactions that have been closed-out to date. Our win percentage on completed put trades nudged up slightly to 91.7%.

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We took advantage of the weak opening on yoga wear maker lululemon (LULU) to sell 2 new contracts of Jan. 2016, $35 strike puts @ $5.50 per share.

Our wosrt case obligation is to buy 200 shares of LULU at a net cost of $29.50 ($35 strike price - $5.50 per share put premium). That would be lower than any shares have actually traded since calendar year 2010, when EPS were $0.79. Management now thinks LULU will earn at least $1.71 for the fiscal year ending next January.