Esprit Put Option

I opened a new option position with Esprit yesterday. The stock was trading at around $51.50.

Reason for Entry

Fundamental: Esprit is a good company shown stable dividend payment history. If I brought the share at $50 that would approximately a 5%p.a. dividend yield. In my view the company is very profitable with a ROE of about 40% and Net Profit Margin of 16%. Also a very healthy looking balance sheet with current ration of 2.46 and a good cash to debt ratio.

Technically: The stock is touching 30 week EMA on the weekly chart which mean the share price is good value. With EMA point up trend. The three month trend is up, price had just pull back from the recent high.

So when I talked to my broker, I said I would like to write to open X number of put option contract for ESP with strike price of $50, expiry Nov 09 at a premium of $1.5 per contract.

P.S Every time I write a Put option contract, I always had enough cash to cover my exposure in case I get exercise on my position.



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