Protective Put on EZPW before earnings call
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Going into the 4th Quarter earnings call for my recent investment of EZPW, I decided to purchase a few out of the money put options representing a protective put position. I decided to purchase 6 put options of November 12.50 right before the earnings call for 0.15/share. The resulting purchase cost me $100.95 which includes commission costs.
Coincidentally, EZPW earnings beat the street and the company also raised guidance for the upcoming fiscal year confirming my support to hold onto my long position in the stock. With the news out, I will try to sell the 6 put options for some residual value in the next few weeks as I need those for any additional protection.
I will update my portfolio for this recent put option purchase and strive to outperform the S&P 500 with every investment.
Author disclosure: I am long EZPW stock and long put options of EZPW.
3 Comments on this post
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pfstock said:
It looks like you got worried that the earnings call might not go as expected. At this point EZPW is well above the $12.50 strike, so it seems likely that those options will expire. Did you consider entering a protective stop order instead of buying puts? I am curious about your reasoning here.
I was still puzzling over why Fidelity didn’t charge you a per option commission. But I figured out that even though Fidelity option commissions are $10.95 + $.75 per contract, they charge a maximum of 5% of the principal or the minimum commission of $10.95, since it is a small transaction.
Lastly, about striving to outperform the S&P 500, you might want to re-read my post about The Backward Investor.
November 9th, 2009 at 3:53 pm -
Elias said:
PFstock, I chose to benchmark against the S&P 500 becuase that would be my investment of choice if I wasn’t an active investor. I validate my active investing by being able to outperform the S&P 500, thus creating value for my actions.
November 13th, 2009 at 11:12 pm -
carp fishing said:
I know its bad to try and time the market, but I’m looking to get out of some positions in stocks I own and was wondering if stocks generally rise right before earnings calls, if no negative news is present?
November 16th, 2009 at 1:23 am
