Risk-free investment in Facebook
Want to be in the market but can’t handle all the volatility? Here’s how Hurley Investments, LLC locked in a guaranteed profit on shares we have been invested in.
Our current cost basis on our Facebook shares is 77.23. The stock has broken out of a recent consolidation range and has been quite bullish the last week and was at 85.40 when I made the adjustment. I wanted to position for the upcoming volatility due to their earnings event next month and wanted to go ahead and not just prepare for that but to also lock up some profits as the market has been very volatile recently. I bought to open a May 85 strike long put for a 3.56 debit, which gives up the right to sell the stock at that price through the 3rd Friday in May. I also sold to open a May 92.50 for short call for a 1.26 credit, which means we’re obligated to sell the stock at that price if we’re above that strike at expiration. Here’s how the numbers work out:
Starting cost basis- 77.23
BTO 85 LP- 3.56 debit
STO 92.50 SC- 1.26 credit
77.23+3.56-1.26= 79.53 current cost basis
So our new cost basis is 79.53 with the right to sell the stock at 85, even if the stock goes to 0, we’ll still make 5.47 per share. So we’ve locked in a 5.47 (85-79.53=5.47 )profit per share with the potential to make 12.97 per share (92.50-79.53=12.97). With 52 days until the May options expiration our ROI breaks down this way: 5.47/79.53=6.87% * 365/52=48.27% annualized ROI- guaranteed. Our upside in the trade is 12.97/79.53=16.30% * 365/52= 114.47% annualized ROI potential.
This is just a quick example of how Hurley Investments, LLC can manage your account so you can stop worrying about the market. We have other risk free trades right now and have other positions that we’re managing to turn a losing trade into a profitable trade.
Take care of the risks the profits will take care of themselves.
Michael Virden
Investment Advisor Representative
East Coast V.P. for Hurley Investments, LLC
901.870.7187
