Dividend Growth Forum

LB - I just bought 20 contracts of Feb $95 calls, just in case there is an additional price run from here.

For the option novice, 20 contracts = 20 shares? How much does each contract cost?

What is the reasoning for this move? Are you trying for a quick profit or as an entry point into long term ownership of LB?

I have no knowledge or interest in LB. Just decided to buy the 2000 calls for a quick return if the price continues to run over the next week or two, as the dividend capture group buys for the dividend plus special. Twenty contracts controls 2000 shares and cost me 20 cents each for a total of $400. As the price rises, so will the value of the contracts which as I type are selling for 25 cents each.

Looks like it could be a decent trade for you Alex. LB looks like a good company, but trading at a rich valuation here at more than 25X earnings. Never know how high the crowd will push it though.

Worth putting on a watch list though should the price ever pull back. Very nice growth rate and appears to have management willing to return cash to shareholders.

(02-05-2015, 10:50 AM)hendi_alex Wrote: [ -> ]I have no knowledge or interest in LB. Just decided to buy the 2000 calls for a quick return if the price continues to run over the next week or two, as the dividend capture group buys for the dividend plus special. Twenty contracts controls 2000 shares and cost me 20 cents each for a total of $400. As the price rises, so will the value of the contracts which as I type are selling for 25 cents each.

Good to know that one contract equates to 100 shares.

A few more options questions:
1) What platform do you trade these on?
2) Do you sell the contract before it expires, or wait till it expires, buy the stock, and resell it at market value?

It those questions really depend upon one's objective. We use TDA. Here I am anticipating a dividend run and have no interest in the shares. I'll give the ticker a few days to run, if it is going to and then will sell the contracts.

Sometimes I sell puts, for a position that I would like to increase, but which am unwilling to pay the current price. For example, I would like to build my ESV position but on Jan 21st was unwilling to pay the current price of over $29. Instead I sold three Feb 20 contracts for ESV $28 puts. The sale brought in 80 cents per share. If exercised, I get my shares at an effective price of about $27.30. If the contracts expire, then I net $250 or 3%, which is a pretty good return for one month. If the share price cooperates, I'll keep selling the puts until the contracts eventually get exercised. By choosing fairly close expiration dates, the duration is very short and helps manage risk. The only real risk of using this approach is if the price runs and I miss my shares, but there are always plenty of alternatives, so nothing really lost. IMO one should NEVER sell puts for shares that the investor does not want to own. That kind of speculation can be very dangerous.

Decided to take a quick exit from the LB calls. My guess is that the shares get pushed higher but I don't really like the Feb 20 expiration date since most of the run will likely take place a week to ten days prior to the ex. dividend date. Netted $255 on $422 investment. Not too shabby as a percentage, 60% in one day! Quick trades have been working very well lately.

(02-05-2015, 11:50 AM)hendi_alex Wrote: [ -> ]It those questions really depend upon one's objective. We use TDA. Here I am anticipating a dividend run and have no interest in the shares. I'll give the ticker a few days to run, if it is going to and then will sell the contracts.

Sometimes I sell puts, for a position that I would like to increase, but which am unwilling to pay the current price. For example, I would like to build my ESV position but on Jan 21st was unwilling to pay the current price of over $29. Instead I sold three Feb 20 contracts for ESV $28 puts. The sale brought in 80 cents per share. If exercised, I get my shares at an effective price of about $27.30. If the contracts expire, then I net $250 or 3%, which is a pretty good return for one month. If the share price cooperates, I'll keep selling the puts until the contracts eventually get exercised. By choosing fairly close expiration dates, the duration is very short and helps manage risk. The only real risk of using this approach is if the price runs and I miss my shares, but there are always plenty of alternatives, so nothing really lost. IMO one should NEVER sell puts for shares that the investor does not want to own. That kind of speculation can be very dangerous.

I totally agree with you on these.
I'm doing the same thing when I want to buy more shares (but in a single contract trades due to much smaller account size).

I've owned LB for many years. Yesterday, they announced record earnings, but also lowered their forward guidance. Sandbagging? Probably not, but interesting.

http://seekingalpha.com/news/2325836-l-b...on-revenue