Baked Up New Put Sales Today
By Dr. Paul Price of Market Shadows
Panera Bread (PNRA) is similar to Costco (COST). Both companies are much loved by investors and rarely sell at cheap multiples. Each has an enviable long-term growth record.
I think Panera is back to a savory level for buying shares. It's trading at around $154. For those who use options, selling puts is a way to enter the stock at a lower price, or collect the premium if the puts expire worthless.
Temporary share price weakness is the best time to sell puts on names like these. The Market Shadows Virtual Put Writing Portfolio already established a short put position in COST. This morning we added two new contracts on PNRA’s Jan., 2016, puts.
We sold one contract each of the $160 and the $170 strike price puts for $23 and $29 respectively.
Our worst case scenario would be forced purchase of 200 PNRA shares, one lot at a net cost of $137 ($160 strike price – $23 put premium) and the other 100 shares at a net cost $141 ($170 strike – $29 premium).
If Panera does rally past our chosen strike prices, we’ll pocket 100% of the $2,300 and $2,900 premiums collected.
Panera Bread has not changed hands below our strike prices since mid-summer of 2012. The shares peaked at $194.65 in May 2013 and hit $193.20 earlier this year. The dead low was $150.30 in 2013 and was $149.60 so far in 2014.
