SCA puts closed for a profit

Around a month ago at the end of August I suggested that there could be a put selling opportunity on SCA stock here. At the the time it was trading around 169 SEK, was near 52-week lows and had previously traded in a range of 165-160 SEK.

I decided to sell the two months out October 165 puts for 2.40 SEK but modified the strategy a bit by buying the October 150 puts for 0.4 SEK (this is now called a 'put bull spread'). This protected my downside, as these puts would increase in value if the share price fell below 150 SEK, and fixed my maximum loss to 1500 SEK per contract (i.e. (165-150)*100).

Total income per contract (100 shares) was (2.4-0.4)*100=200 SEK for the two months, 13% return on the money 'at risk'. Although to be fair this does not really accurately reflect the true return, I prefer to calculate using the money that would be required to buy the shares at 165 SEK if assigned. In this case the return would be 200/16500=1.2% for the two months, 7.3% APR.

Since then the share price fell a bit but never touched the 165 level and has recently had a nice run up to 177.5 SEK.

After a month the premiums on these October puts has fallen to just 0.25 SEK so I bought them back to close the trade. I didn't think it was worth keeping it open for another month for so little money and it would be better to use the money on other opportunities.

Total income was 175 SEK, 1.06% per contract but was over the 1 month instead, thus increasing the APR to 12.7%.