Keep Collecting Cash From This Winning Trade

in money •  4 months ago

This fashion leader never goes out of style.

The stock has consistently provided an opportunity to sell puts for income.

Here is how it works. You sell a put and get paid up front for agreeing to buy a stock at the strike price (just the fixed price quoted on the option contract). You are forced to buy shares if the share price is trading below the strike price on expiration date. Otherwise you walk away and keep the cash.

You risk is reduced because of the upfront payment of cash into your brokerage account. Put selling is best done on stocks you would be happy to buy at the strike price since there is a chance of being put shares during the contract terms.

Today's opportunity is once again fashion brand Tapestry(TPR).

Tapestry stock was formerly known as Coach. They operate more than 1,400 stores around the world selling handbags, wallets, clothes, footwear, jewelry, and other high-end accessories.

Sales are up 31% over the prior 12 months with earnings rising 22% from $2.15 to $2.64 EPS.

Tapestry has been in a big uptrend over the past few years.

tpr uptrend.jpg

Pullbacks are normal and this one is expected to be short-lived. This is a great time to earn big cash payout.

Trade details:

Sell the October 19, $50 puts on Tapestry for $1.50 using a limit order. Receive a 3% return on your purchase obligation for agreeing to purchase shares at a slight premium to current share price.

At expiration is shares are above $50: you will keep the $1.50 free and clear. In six weeks, that comes to a 28.8% annualized return.

At expiration is shares are below $50: you will buy shares at a 2.5% discount to today's price.

For protection use a stop loss at $43.50 which is about 10% below your assigned shares cost basis. Tapestry will have broken its long-term uptrend.

Customers will purchase Tapestry products for years to come.

Take advantage of the pullback by selling puts today.

Disclosure: I wrote this article myself, and it expresses my own opinions. I have no business relationship with any company whose stock is mentioned in this article.

Corning (GLW) trade is doing well. The October 19, $33 puts sold on August 29 you're on track earn a 16.5% annualized return. Continue to monitor with a $29 stoploss.

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