Established Two New Short Put Positions

Today, two new 100% cash-secured Put option positions were established in Quanta Services Inc. (ticker PWR) and Twenty-First Century Fox Inc.(ticker FOXA) by selling June 2017 Put options. The price received was $.65 for both positions. Put options were chosen instead of the comparable covered calls since the potential return-on-investment result was slightly higher for the Puts in this instance.  The Covered Calls Advisor does not use margin, so the detailed information on these positions and the potential results shown below reflect the fact that these positions were established using 100% cash securitization for the Jun2017 Put options sold.

 The potential returns for each investment are:

• Quanta Services:  A +1.9% absolute return in 40 days (equivalent to a +17.6% annualized return-on-investment); and
• Twenty-First Century Fox Inc.:  A +2.3% absolute return in 40 days (equivalent to a +20.8% annualized return-on-investment)

1. Quanta Services Inc. (PWR) -- New 100% Cash-Secured Puts Position

This position was established when the price of Quanta Services was $34.27 (3.7% downside protection to the strike price).

The implied volatility of the Put options was 25.6 when this position was established; so the $.65 price received per share received when the Puts were sold is a nice premium to receive for these 3.7% out-of-the-money Put options.    

The transaction was as follows:
05/08/2017  Sold 6 PWR Jun2017 $33.00 100% cash-secured Put options @ $.65
Note: the price of PWR was $34.27 today when this transaction was executed.

A possible overall performance result (including commissions) would be as follows:
100% Cash-Secured Cost Basis: $19,800.00
= $33.00*600
Note: the price of PWR was $34.27 when these options were sold

Net Profit:
(a) Options Income: +$381.15
= ($.65*600 shares) - $8.85 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If PWR is above $33.00 strike price at Jun2017 expiration): +$0.00
= ($33.00-$33.00)*600 shares

Total Net Profit (If Quanta Services stock price is above $33.00 strike price at Jun2017 options expiration): +$381.15
= (+$381.15 options income +$0.00 dividend income +$0.00 capital appreciation)

Absolute Return (If PWR is above $33.00 strike price at Jun2017 options expiration): +1.9%
= +$381.15/$19,800.00
Annualized Return: +17.6%
= (+$381.15/$19,800.00)*(365/40 days)

The downside 'breakeven price' at expiration is at $32.35 ($33.00 - $.65), which is 5.6% below the current market price of $34.27.


2. Twenty-First Century Fox Inc. (FOXA) -- New 100% Cash-Secured Puts Position

This position was established when the price of Fox stock was $28.88 (3.0% downside protection to the $28.00 strike price) and 40 days remaining until the options expiration date.

The implied volatility of the Put options was 26.2 when this position was established; so the $.65 price received per share received when the Puts were sold is a nice premium to receive for these 3.0% out-of-the-money Put options.    

The transaction was as follows:
05/08/2017  Sold 10 FOXA Jun2017 $28.00 100% cash-secured Put options @ $.65
Note: the price of FOXA stock was $28.88 today when this transaction was executed.

A possible overall performance result (including commissions) would be as follows:
100% Cash-Secured Cost Basis: $28,000.00
= $28.00*1,000


Net Profit:
(a) Options Income: +$638.55
= ($.65*1,000 shares) - $11.45 commissions
(b) Dividend Income: +$0.00
(c) Capital Appreciation (If FOXA is above $28.00 strike price at Jun2017 expiration): +$0.00
= ($28.00-$28.00)*1,000 shares

Total Net Profit: +$638.55
= (+$638.55 options income +$0.00 dividend income +$0.00 capital appreciation)

Absolute Return: +2.3%
= +$638.55/$28,000.00
Annualized Return: +20.8%
= (+$638.55/$28,000.00)*(365/40 days)

The downside 'breakeven price' at expiration is at $27.35 ($28.00 - $.65), which is 5.3% below the current market price of $28.88.