19 Feb United Utilities Sold
It has struggled around the current level. GS issued a sell note – hence gap lower this am. Market looks a little overbought + likely to pullback so bought back open calls + puts + sold UU. Good div so would be happy to buy again 10-15% lower.
Gross Profit = 14% = £910.00 .....BUT....
In this case selling options on the stock reduced risk + reduced reward….
Analysis below
Here.. D = Net Debit & C= Net Credit
08 Dec 20060 C 453.20 Sell to open 1 United Utilities mar07 800 Put @ 49p
Total dec 06 option C = 571.4
Total extra credit 2006 = 1333.4
**Less debit for call buyback – net credit for 2006 = 56.2
Total extra credit 06+07 =1479.7
Less 503 debit for call buyback – net debit for 06+07 = 300
Gross Profit = 14% = £910.00
Total feb 07 D for buyback = 503
So £68.40 = net profit on these options
Overall a disappointing series of trades – would have done much better just buying shares + taking dividends!
One problem was very poor premium on calls & puts sold in dec 06 – not worth selling for that premium. Overall not a great return for selling calls + puts – was to some extent expecting it to continue to 800p – which would have made it a good trade but I think the risk is for SP weakness in short term hence the options buyback + sale - effectively a risk avoidance stop loss sale without the loss!
No comments:
Post a Comment