Reluctant Capitalist Weekly Option Review 200612

This is a reluctant capitalist option
trade review for June 12th 2020.
The option trades discussed are usually
traded a few days before the company’s
earnings announcement, why? “That’s where the money is”. This episode
we’ll review an option trade executed
this week a naked put option on
Lululemon Athletica and an option plan
for next week a short put on oracle
Corporation investing involves
substantial risk this information does
not make any guarantees or promises as
to any results that may be obtained from
using this information stocks and
options involve risk and are not
suitable for all investors
please understand option trading
strategies and all possible outcomes
prior to executing trades naked put
options that’s where the investor rights
sells or shorts all the same transaction
a put option with neither a long put
option nor a short position in the
underlying stock these trades are
evaluated as annual returns for
reference and common understanding while
these returns sound relatively high a
Black Swan event can result in an
equally high or higher loss a trade
executed this week was a naked put
option sold on lululemon athletica inc a
naked put option is selling a put option
without buying a long option position or
being short the underlying shares the
short

put option was sold on june 11th
with a strike price of 265 dollars and
expiring the next day on june 12th this
trade was made with confidence because
there was a 75% probability that the
stock price would stay above the lower
cone support line after their earnings
announcement the stock price fell to
$296 still safely above the strike price
of 265 this trade was made with the will
and ability to buy a hundred shares at
265 dollars a share in case the stock
price dropped below the strike price
on Friday the stock price closed above
the strike price and the option expired
worthless and a net profit of $21 was
retained the profitability calculations
are $22 received from the short put
option $1 expense for the transaction
for a net profit of $21 the holding
period return on this was point zero
eight percent this is calculated on a
short put option by multiplying the
strike price of two hundred and
sixty-five dollars times a hundred
shares each option contract covers 100
shares of stock the annual return is
point zero eight percent times 250
divided by one this position was held
for one day the result is a twenty
percent annual return the reason two
hundred and fifty days was used as
opposed to 365 is that this option
position was not held over a weekend and
there are about two hundred and fifty
trading days a year if 365 days was used
the annual return would have been much
higher but the net profit would remain
the same now a review of a trade plan
for next week the company is Oracle
Corporation with an earnings date of
June 16th and an option expiration date
of June 19th the plan is to execute a
short put spread for an annual return of
21 percent or more thank you for
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