New Trade: Sold Coca-Cola (KO) Puts

Yesterday I entered into the following transaction in a taxable account:

01/11/2011    STO 4 KO Feb 18 2012 65 Puts @ .51                +190.95

Due to some fungus in orange juice, Coca-Cola was very weak yesterday. I took advantage of the opportunity to enter into a trade on this blue chip, dividend champion stock that needs no introduction. The margin maintenance on this trade is $4400. If they expire worthless we will earn $190.95 in 39 days. This equates to a return on margin of 4.34% or 40.61% annual. There is money in this account to purchase the shares if put to us but we'd probably roll for a net credit before we'd allow that to happen. Buying KO at 64.50 ain't a bad thing though.

Profitable Trade - Coca-Cola (KO) Puts

Today our KO puts expired worthless. The transaction was as follows:

Sold 2 KO Dec 17 2011 62.5 Puts@.71                  +130.47

We earned 1.04% in 26 days or 14.65% annual. If one were to calculate return on margin (ROM) our return with an initial margin requirement of 1794.99, comes to 7.26% or 102% annual.

Sold Coca Cola (KO) Puts

With the DOW down ~300 to ~11500 and Coca-Cola down to ~65.58 I entered into the following transaction in a taxable account:

Sold 2 KO Dec 17 2011 62.5 Puts@.71                  +130.47

We'd be happy to own KO at ~62. Our yield on cost will exceed 3%. In addition, KO is set to raise the dividend next quarter. If the puts expire worthless we will earn 1.04% in 26 days or 14.65% annual. If one were to calculate return on margin (ROM) our return if the puts expire worthless, with an initial margin requirement of 1794.99, comes to 7.26% or 102% annual.