This site’s Value Investment Fund had to comply with with two separate PUT options contract for Essex Property Trust sold back in late May and mid June of 2022. The combined total of both contracts were for 180 shares with strike prices as follows:
- 80 Shares @ $260 each for a total cash investment requirement of $20,880 including transaction fees;
- 100 Shares @ $240 each for a total cash investment requirement of $24,100 including transaction fees.
Transaction occurred on October 21, 2022. Total cash requirement to comply equaled $44,980. The cash position in the bank on October 14th was $3,239. In order to have the cash available on Friday the 21st, the Fund had to sell an existing position in one of its investments in order to timely raise the cash needed. On October 19th in the morning, the Fund sold 985.3567 shares of Wells Fargo. Shares of Wells Fargo were sold at $45 each and netted $44 each after transaction fees. Total cash raised was $43,355.69.
With a cash balance on the 21st of $46,595, the Fund complied with the terms of both option contracts and fulfilled its legal obligation. This left a cash balance of $1,615.
As for the Wells Fargo transactions. Here are the results:
Sold 985.3567 Shares Wells Fargo at $45.00 – Gross Sales Proceeds $44,341.05
Transactions Fees at $1/Share (985.36)
Net Proceeds from the Sale of Wells Fargo $43,355.69
Basis in Stock 35,732.50
Gain from the Sale of Wells Fargo $7,623.19
Total Dividends Earned During the Holding Period 1,990.42
Total Realized Earnings $9,613.61
Holding Period 639 Days; Average Annual Return 13.83%
For a full recap of this transaction, read: Sold Wells Fargo.
Basis per share of the 100 remaining shares is $4,267.50, $42.68 per share.
In summary, one of the primary goals of value investing is to minimize risk. But, when repercussions of risk unfold, wise value investing makes associated cost negligible. Recall from prior articles, this site’s Value Investment Fund earned $1,714 from the sale of those PUT Option contracts on Essex property Trust. Furthermore, Essex Property Trust is a REIT and as such, it is required to pay out dividends every quarter. The current quarterly dividend is $2.20 per share. Thus, the average cost investment net of PUT Option proceeds is $240.37 per share. With annual dividends of $8.80, the dividend yield is 3.67%. This is after all transaction fees involved. This is a pretty respectable dividend yield. Once the price per share hits $300, the Fund will proceed to sell this investment and earn an outstanding return on the investment. Act on Knowledge.
© 2023, David J Hoare MSA. All rights reserved.
