Market Shadows added a new 'short put' position to our virtual SOLD put positions this afternoon.
We sold one contract of the McDonald’s (MCD) January 15, 2016, $100 put @ $14.50 per share.
Our ‘if exercised’ price drops down to $85.50 ($100 strike price - $14.50 put premium). That is $9.35 per share below the 3:42 PM trade inception price of $94.85.
In a worst case scenario we will be forced to buy 100 shares of MCD at a price near the company’s 30-month lows. At that level we'd collect a 3.79% current yield on the net purchase price, even at the current 81-cent quarterly rate. The actual dividend will likely be higher before our January 2016 expiration date.
McDonald’s is not a home run kind of stock from today’s quote. It does appear mildly undervalued based on historical valuation levels. The above-average dividend keeps investors interested and is typically raised each year.
Technical support is very strong. MCD has traded above our break-even price about 95% of the time since the middle of 2011.
Research firm Morningstar rates this conservative name with 4-stars out of 5. They call 'fair value' as $105. Standard & Poors’ evaluation of McDonald’s is remarkably similar.
Our long-term put position will work out just fine if MCD goes up, remains unchanged or even if the shares decline slightly. I’m expecting that MCD will be well above our $100 strike price well before the option's expiration date.
Market Shadows' Virtual Put Selling Portfolio booked a number of nice winners (short puts which expired worthless) today. Those profits will now be listed as closed-out transactions.
The Put Selling Portfolio was initiated in January, 2013. We have now completed twenty-one transactions (STO - BTC or expired) with 19 winners against just two losing trades. Our cumulative net gain stands at $10,931.
It is not possible to calculate ROI on shorted options that never get exercised. We took money in upon sale of the puts and profited handsomely on a negative cash outlay.
What we can measure is the extra, almost $11K, in our brokerage account.
See details of all our completed and current option positions by clicking here.
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