When good stocks plunge… consider selling puts.
Packaged foods maker ConAgra (CAG) sold off sharply this morning as estimates for FY 2014 (ends May 25, 2014) dipped to $2.22 – $2.25 from $2.30 – $2.40.
The shares touched a new 52-week low at $28.60.
Market Shadows jumped in to sell 4 contracts of the CAG Jan. 15, 2016, $30 puts @ $4.60 per share for our Virtual Put Writing Portfolio.
We collected $1,840 for the committment to purchase 400 shares, if ultimately exercised. That represents our maximum profit. Break-even on this trade is just $25.40 per share ($30 strike price – $4.60 put premium).
$25.40 is lower than any ConAgra shares have actually changed hands for since the news of the Ralcorp acquisition was announced in September of 2012.
We will now follow this trade as an open position in Market Shadows’ put selling portfolio.
