Looking back to 125 days ago, Restoration Hardware Holdings, Inc. (RH) priced a 8,000,000 share secondary stock offering at $70.00 per share. Buyers in that offering made a considerable investment into the company, expecting that their investment would go up over the course of time and based on early trading on Thursday, the stock is now 5.4% higher than the offering price.Investors who did not participate in the offering but would be a buyer of RH at a cheaper price, might benefit from considering selling puts among the alternative strategies at their disposal. One interesting put contract in particular, is the January 2016 put at the $50 strike, which has a bid at the time of this writing of $7.10. That would result in a cost basis of $42.90 per share before broker commissions in the scenario where the contract is exercised. If the contract is never exercised, the put seller would still keep the premium, which represents a 14.2% return against the $50.00 purchase commitment, or a 6.5% annualized rate of return (at Stock Options Channel we call this the YieldBoost).
Use Options For A Chance To Buy RH At A 42% Discount
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