ANF has been up since October 8th on better-than-expected same store sales. SSS dropped by 18%; analysts were expecting -20.4%.
Share price increased over 5% on the news. Since the $34 puts are now in-the-money, the cost decreased sharply. I paid $3.70/share for 3 more $34 ANF Feb2010 puts, which slightly changes my profit/loss picture.
I used the spread between the $27 puts I sold and the $34 puts I bought to bring my net cost down. Net, I paid $3.44 for the right to sell ANF at $34.
I have the right to sell at $34, but must buy at $27. I make a profit starting when ANF is ($34 - $3.44) = $30.56, and the profit increases until ANF is at $27. This limits caps my maximum profit to ($30.56 - $27) = $3.56 per share.
I have now paid an additional $3.70 for the right to sell an additional 300 shares of ANF for $34. Since I sold no puts to pay for this, my profit potential is different. I make a profit starting when ANF is ($34 - $3.70) = $30.30. My profit increases until ANF reaches (theoretically) $0, for a maximum profit of $30.30 per share. I don't think this is likely to happen, but it's nice to dream.
