Just posted my first buy/write strategy purchase – LYG.
Well.. as I posted a few days ago on how to purchase a stock for 15 – 20% off the current market price, I have done just that with a stock which I believe is going to go up and I’d like to be a part of it.
LYG
So as you can see, this stock has been beaten up pretty good over the last year.. but more importantly they used to have a dividend of $2 a share on a yearly basis (when the stock was at $20). So if they look to put that back in.. well, that will boost the stock for sure! However I don’t see that happening this year.. we’ll see.
Now they have since cut that dividend to nothing.. so as you can expect, the price of the stock has dropped to it’s low of just over 2.22 or so during march. Pretty good rebound since then, and I expect more.
Now I have just purchased 100 shares at $5.90, I have concurrently sold the July 09 $5 call and a put option for 1.35 and .45 respectively. So I’ve banked $1.80 per share.. my price of the stock is now $4.10 per share.
If the stock stays around where it is now or above $5 for that matter in July, I will have my shares called away and have a profit of $1.80 a share or $180. Off of the $590 purchase price that’s just over 30% profit in 2 months. I’ll take it.
If on the other hand the shares go below $5 to say, $4 (over 47% drop) … then I will have to buy 100 more shares at $5.00.. which means that I’ll have paid $910 for 200 shares.. or $4.55 a share on average… which I don’t mind paying.. in fact I would likely do the same thing again and see if I can’t get more shares come July expiration.
Truth be told I’m looking at just getting my 30% profit and moving on. We’ll see how it goes.
In the meantime.. waiting for a good pennystock to try to short with TimAlerts
