By Paul Price
Fertilizer maker Agrium (AGU) is down along with the market today. Shares were trading lower by 1.6% to $91.74 as of 10:42 a.m.
We’re going to use the general weakness in the stock market to write (sell) one contract/put of the Jan. 18, 2014 expiration $90 strike put for the current bid price of $7.80 per share. (One contract is for 100 AGU shares, so we collect $780 for selling one put.)
Our Virtual Put Selling Portfolio will be credited with $780. We stand committed to buy 100 shares of AGU at a net price of $90.00. The strike price, $90.00, minus the put premium we collected, $7.80, equals $82.20. $82.20 is our net cost/share if the put option is ultimately exercised. It's a 9% discount to the current trading price.
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Agrium 52-week trading range is $74.28 - $115.31. Estimated earnings for 2013 is $9.86 per share. AGU’s current yield is 2.18% at today’s quote. The yield would be 2.43% at our ‘if put’ price ($82.20).