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I'll Take My Profit Up Front With A Side Of Curly Fries (SDRL)

|Includes: Seadrill Limited (New) (SDRL)

I'll Take My Profit Up Front With A Side Of Curly Fries (SDRL)

12/29/2016

Since no one knows what's going to happen with SDRL 4 minutes from now much less 4 months from now I figure I'll take the cash up front.

Today's proposed trade:

What actually happened:

For those of you not that familiar with the way PUT options work, here's what happened. For an investment (or wager depending on your POV) of $19,687.50 (the dollar requirement) I then received a premium of $8,135.07 net/net of fees and commissions to commit to taking someone else's shares @ $3.50/share on Feb 17, 2016.

What's that translate into in terms of dollars and donuts?

$8,135.05 / $19,687.50 = +41.32% IMMEDIATE Income Profit.

Not a bad net return for 6 weeks "work".

I can spend it or I can reinvest that premium today to increase my net profits....

Not bad compared to a "buy and pray" strategy. JMO of course.

Some Q&A:

Q: How long is my $ actually at risk?

A: Until the options expire (Feb 17, 2017)

Q: What could happen?

A: Only 4 things:

1) The SDRL stock price is over $3.50 on the expiration date (Feb 17, 2017) and the options expire, I keep the premium, my "dollar requirement" is released to be used again

or

2) The SDRL stock price is under a little under $3.50 on the expiration date (Feb 17, 2017) and I roll the shares out to March 31 for a net credit

or

3) The SDRL stock price is a little under $3.50 on the expiration date (Feb 17, 2017) and I let the shares be put to me and sell calls on them for March 31

or

4) The SDRL stock price is way under $3.50 on the expiration date (Feb 17, 2017) as the stock price has collapsed, the shares are put to me in the middle of the night, and I take solace as my net cost of shares is only $2.85/share, and then I think of something else to do to save myself.

YRMV of course

Disclosure: I am/we are long EVERYTHING.

Additional disclosure: Just show me the money honey