Ross Stores (ROST) has posted outstanding long-term numbers. The company’s balance sheet is as beautiful as their designer clothing.
Despite excellent fundamentals, shares that were trading as high as $82 last November were down to $66.69 this morning. ROST typically commands about 16 times current year earnings.
Last fall’s peak price was a bit expensive by historical standards at a P/E of 21.1x. Market Shadows loves the stock but we’d refer to own it at a better price.
Our Virtual Put Writing Portfolio sold three contracts of the ROST Jan. 2016, $65 puts today @ $7 per share.
We must now stand ready to buy 300 shares of Ross at a net cost of $58.00 per share ($65.00 strike price – $7.00 put premium). That level has proven a winning one over the last 28 months.
Assuming the company’s historical growth pattern continues, the nineteen months left until expiration should give us an even greater margin of safety.
Our best case result will occur if ROST merely remains above $65, as it already is today, on the put option’s Jan. 15, 2016 expiration date. If that plays out we’ll pocket 100% of the $2,100 collected upon sale of the puts.
Click on the following link to see all Market Shadows’ closed-out and current option positions. Virtual Put Writing Portfolio
Comments
Log in or sign up to join the conversation.