By Paul Price
Market Shadows locked in a profit today by 'buying to close' our Aug. 2013, $45 strike price, short put on Life Time Fitness (LTM) in our Virtual Put Selling Portfolio. We paid 15-cents a share to close out the trade one month ahead of its August 17 expiration date.
We had sold this put for $5.60 per share on Feb. 20, 2013, when LTM shares were selling for a depressed $39.40. Closing was probably unnecessary but is good insurance against an unexpected market pullback or negative company-specific news.
We earned 97% of the maximum profit potential while eliminating any chance of a reversal of fortune.
At the time of the put sale, the $45 strike was in-the-money and looked aggressive. Today, with LTM trading for $54.40 it appears we were too conservative.
We purchased Life Time Fitness shares outright in our Virtual Value Portfolio on Feb. 18, 2013 at $42.26. We are still long LTM shares but may take profits on the stock soon as well.
See details of all open and closed-out transactions in both virtual portfolios here.