When a good company isn't yet a great value… consider put writing.
Pharmacy benefit manager Catamaran Corp. (CTRX) has proven to be a premier growth company. The only problem was its high valuation.
Today's Q4 2013 earnings call brought year-end results that hit all-time peaks but failed to reach analyst estimates. The shares were down about 12% around mid-morning @ $45.49.
Market Shadows Virtual Put Writing account sold one contract each of the Jan. 2016, $35 and $40 strike price puts @ $3.40 and $5.30 respectively.
Our maximum gains will occur if the shares hold above our strike prices through the expiration date. If not, we will be forced to buy 100 CTRX shares per contarct at net costs of $31.60 ($35 strike – $3.40 put premium) and/or $34.70 ($40 strike – $5.30 put premium).
Shares of CTRX have not traded as low as either of those levels in more than two years.
These trades will now be tracked as open positions in our Virtual Put Selling portfolio.
