Option trade

    With the markets on both sides of the border (US and Canada) marching higher, it is difficult to find stocks trading for cheap. I am bulling on Telus Communications at the moment. Looking at a 6 month chart of Telus Communications (T.TO).

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      On February 15,  I sold a put option in T.TO with a March 17 2017 expiration day.  I collected a premium of $29.05 after commissions.  The strike price is $42.00 per share.

Summary:

Strike Price: $42.00
Total Premium Received : $29.05
Days to Expiration: 30
Current Annual Dividend = $1.92
 Option Assignment Fee = $24.95

Scenario #1 :  Option not assigned

Total Return = $29.05 / (1*100*$42.00)
                     = .00692
                     = 0.692%

The total return for 30 days is 0.692%.  The annualized return is 8.42%.  My high interest savings accounts pays an annual interest of 0.80%.

Scenario #2:  Option is Assigned 

Adjusted Cost Base  per share= [1*100*$42- $29.05 +$24.95] / 100
                                                = $41.96

Yield on Cost = $1.92./$41.96*100 %
                       = 4.575%

 What would the yield be if shares purchased directly at $65.50 using a limit order?

Commission = $4.95

ACB/per share = [1*100*$42.00+$4.95 ] / 100
                         = $42.04

Yield on Cost = ($1.92/ $42.04) * 100%
                       = 4.567%

Disclosure:  I do not own any shares of T.TO in any accounts as of this writing.

DISCLAIMER

I am not a financial planner, financial advisor, accountant or tax attorney. The information on this blog represents my own thoughts and opinions and should NOT be taken as investment or business advice.

Every individual should do their due diligence to make their own financial decisions based on their financial situation and tolerance for risk.