Friday, February 19, 2010

Wrote TUP puts

I wrote July $40 puts on TUP for $2.00 per share. With approximately 5 months to expiration, my potential return is:

(premium)/(strike price) = $2.00/$40.00 = 5.0 %

This is the return I get on the cash ($40 per share, or $4,000 per contract) I've set aside to secure the puts. I never write puts on margin.

This comes out to about a 1% return per month, which is the minimum return I require for taking a risk of this nature.