Revisiting a Winning Trade

Holly Frontier’s (HFC) pullback after reporting somewhat disappointing earnings gave us another chance to sell $40 puts at a great risk/reward level.

Earlier this year Market Shadows made money on the now-expired HFC September $40 puts. This afternoon we sold 2 new contracts of the Holly Frontier June 21, 2104 $40 puts.

We received $3.10 per share in premium for committing to buy if HFC sinks under $40 and the puts are ultimately exercised.

Maximum profit would be 100% of the premium collected. Our ‘if put’ price would be $40 (the strike price) minus $3.10 (the put premium) = $36.90 per share.

There is no guarantee that HFC cannot drop through that break-even level of $36.90. However, HFC has not spent one day trading that low during the past year.

The new position has been added to our list of open trades in the Virtual Put Selling Portfolio.