Clothing the Sale, With The Buckle
Courtesy of Paul Price of Market Shadows
We're taking advantage of a pullback to sell out-of-the-money puts on a name we like. (To view all our put sales, see the Market Shadows' Virtual Put Selling Portfolio. Sign up for email notifications of portfolio actions at the top of the page "Subscribe to our Newsletter".)
Teen retailer The Buckle (BKE) is debt-free and has paid both regular plus significant special dividends during seven of the past eight years.
General industry weakness has pushed BKE shares down from last summer’s peak of $56.48 to just $44.27. The company has sterling metrics where it counts. Its slightly above average volatility creates good option premium.
Market Shadows sold two contracts of the Sep. 20, 2014, $40 strike price puts today @ $2.25 per share. Our break-even computes to $37.75 per share, ($40 strike – $2.25 option premium), a level last seen in August of 2012.
Our maximum profit on this fairly conservative position would be keeping the $450 put premium without having to buy any shares. Our worst case commitment is to be ready to own 200 shares at a net price that is also a 17-month low.
This trade has been added to our Virtual Put Selling Portfolio’s list of open transactions.
To see all our closed-out and presently held options positions click here.
