The price of Sainsbury shares at market close on 22nd. July was 316.4p - 23.6p below the "strike" price, (340p) of my December "Put" contracts in these shares. This means that a counterparty could at any time insist on me buying 2000 Sainsbury shares at 23.6p above the market price. But there's a long way to go to the expiry date for these contracts - 15th. December - and a glance at the Euronext Option prices (link above) shows me that a counterparty could sell the contracts - not the shares, in the market for more than 23.6p at the moment. I reckon that's what a sensible option trader would do - assuming he/she wants to dispose of their contracts. So I will hang on for a while yet - quite aware that my stockbroker could call any day to tell me I've just bought 2000 Sainsbury shares at 340p! Then I'd have 5000 shares, so experienced followers of the Sainsbury story will be able to figure out what I would do next.
Addendum 29th. July 2011. During the week, Sainsbury shares have fallen further and closed today at 304.1p - 35.9p below the strike price. The argument for doing nothing at the moment remains as stated above. But now I have my fingers crossed! I don't want to buy shares at 340p. I could buy 2000 at the present price, which would make the average paid for the 5000 shares 319.79p and then take out the 340p Puts and instead sell 5 x 320 calls - but I think I would come out "cash down" on that deal. Ho hum! Who'd be an option trader. On t'other hand, my covered calls in Centrica and Logica are well safe, and the August FTSE contracts are safe also, despite the noises coming out of Washington about the U.S. borrowing requirement. Today Greece . . tomorrow the States!
Addendum 29th. July 2011. During the week, Sainsbury shares have fallen further and closed today at 304.1p - 35.9p below the strike price. The argument for doing nothing at the moment remains as stated above. But now I have my fingers crossed! I don't want to buy shares at 340p. I could buy 2000 at the present price, which would make the average paid for the 5000 shares 319.79p and then take out the 340p Puts and instead sell 5 x 320 calls - but I think I would come out "cash down" on that deal. Ho hum! Who'd be an option trader. On t'other hand, my covered calls in Centrica and Logica are well safe, and the August FTSE contracts are safe also, despite the noises coming out of Washington about the U.S. borrowing requirement. Today Greece . . tomorrow the States!
