Blogvesting

I have recently sold put options for WMT at a strike price of $45 expiring in November 2008 (WMTWI) and January 2009 (WMTMI) at $0.80 and $2.25 per contract respectively. This is in keeping with my new strategy of writing options on stocks that I would like to acquire at strike prices that I find attractive. Walmart is a stock I would hold in a heartbeat if the price is right. It has honed cost-cutting in retail to a fine art, and is already taking market share from weaker rivals. I set aside the full amount of cash that would be required if the put options were exercised, and I only sell options if the company is rock solid and the option price yields greater than 20%. By my calculations, WMTWI has a return of $80 per $4500 with a duration of one month, for an annual return of around 21%, and WMTMI has a return of $225 for 3 months, for an annual return of 20%. Option writing is providing insurance, and the risk is that the underlying stock will undergo catastrophic collapse, so it is essential to carefully choose which stock you choose to insure.