By Paul Price
We sold a new put today for our Virtual Put Selling Portfolio. The underlying shares are Cognizant Technology (CTSH), trading at $63.15 at the time of the trade.
We sold one contract of the January 2014 $65 put at the $7.50 per share bid price. That commits us to potentially buy 100 shares of CTSH at a net cost of...
$65.00 - $7.50 = $57.50, if the option is exercised.
Our maximum profit would occur if CTSH climbs by at least $1.85 (+ 2.9%) to close above the strike price on the Jan. 18, 2014 expiration date.
If the put expires, we’ll keep $750 as profit. Otherwise we will either close out the option or purchase 100 shares at an attractive price.
Our May $87.50 put on Lab Corp of America (LH) expires worthless today. That represents the best case scenario for us, as put sellers. We now retain 100% of the originally collected $400 premium ($4 /share x 100 shares) as profit.
Our obligation to purchase LH shares has been extinguished.
The Lab Corp put is now reflected as a closed out transaction.