Options Trade – Wal-Mart (WMT)

All the bad press Wal-Mart has received over the last few Months has created a buying opportunity.

Today I sold 10 Put Contracts (57 Strike) for WMT – to open a trade. *Premium Collected: $950.00

Here is my strategy breakdown on Wal-Mart:

• Sold the puts with a large Margin of Safety built in – with the $950.00 premium collected, my effective MOS is over 25%.
• If I get put the Wal-Mart shares – I will collect a Dividend in early December 2015 – $480.00.
• I will immediately sell longer term Call Options to lower my Margin of Safety even more – estimate another $1,000.00 in premium.

As you can see – at every point in the process, I am getting paid to take on risk.  If I don’t get put the shares, I still have $950.00 for Christmas shopping.  If I do get put the shares, I get paid a nice dividend a few days later and can sell more premium to continue the cash flow.

The real risk is a major market correction that brings Wal-Mart shares down substantially – which is certainly possible.  This is why we screen first to make sure we have the right Stocks and a large Margin of Safety.

*Excludes transaction costs.