Chungst

A Low-Risk Cracker Barrel [CBRL Group] Options Play

Mr. Price:

You already contradicted yourself based on your comments here and your comments on MicroStrategy Inc. (source: seekingalpha.com/artic...)

You do these trades every day because you use leverage. Someone who doesn't want to use leverage, i.e. using cash collateralized puts, must provide more capital.

Third, take the challenge and perform the trade WITHOUT leverage.

The facts speak for themselves.

A Low-Risk Cracker Barrel [CBRL Group] Options Play

I can only speak facts. It is a SCAM because a person with "original cash outlay of $19,920" CANNOT generate the "$10,440 gain" WITHOUT a margin account and WITHOUT using leverage.

I challenge Mr. Price to open a new brokerage account with about $20,000 (to help cover commissions) and try to execute these trades without a margin account and without using leverage (i.e. cash collateralizing the options).

It is simple deception to claim cash on cash returns when failing to disclosed the amount of leverage being used.

A Low-Risk Cracker Barrel [CBRL Group] Options Play

Separately, I challenge Mr. Price to submit a discounted cash flow analysis to determine intrinsic value to CBRL and supply the necessary inputs so the work can be replicated.

Since Mr. Price claims I am "clueless," then he MUST know the intrinsic value because he has an idea as to the worst case scenario.

A Low-Risk Cracker Barrel [CBRL Group] Options Play

It is a scam because the returns are misleading and that's why I pointed it out.

The original post stated: "That's a $10,440 gain or 52.4% cash-on-cash if CBRL finishes above $30 on expiration day next January" without disclosing the use of leverage. This is not how one would calculate return under GIPS.

Mr. Price himself admitted to his own mistake in his earlier piece on Microstrategy when he wrote:

"You do need a 'margin type' account and paid-up marginable equity to do these trades. You do not need to lay out any cash other than your net purchase price less the option premimums received. "

"If you make $635 on the expired option in your example by writing a put against stock you are already holding it is, indeed, a return on a negative cost of capital.

If you want to calculate the return on your theoretical margin requirement of 20% of your net committment of $6315 then the return on that would be $655/$1263 or 51.86% for the eight months until expiration [assuming the shares stay above $70]."

source: seekingalpha.com/artic...

Clearly, Mr. Price is trying to fool people again. If he agreed to the use of margin to put on the options trades, then he agreed cash on cash returns was misleading. He can't have it both ways (personally, he is the one who is cluesless regarding his hypocrisy).

A Low-Risk Cracker Barrel [CBRL Group] Options Play

It's a scam -- the writer wants you to use leverage (i.e a margin account for the option trades) and then uses "cash on cash" returns (I advised the writer many times before). It's basic smoke and mirrors designed to fool people.

Also, the writer doesn't have a clue to the intrinsic value of CBRL and then makes this dubious claim the worst case of "is that you'll end up owning 2000 shares of a fine stock at a price below the lows of 5 of the past 6 years." That is clearly not the worst case scenario.

If you read his other articles involving options, it's practically the same format -- long a stock, sell a covered call and sell a put.