DGI Adventure 09-09-16 Sold Cash Secured Put – Gap, Inc. (GPS) – $21.00 strike – Oct 7 Expiration

This trade was actually executed on Tuesday 09/06/16. I didn’t get a chance to write about it until today.

I’ve written several write-ups on GPS investments recently, so this one won’t be following the core philosophies article on my investment thesis process. The original investment thesis was done nearly a year ago when I first invested in shares.

It’s probably time for a refresher. I’ll do that on the next one.

The purpose of this post is really just to record the trade. Further discussions on GPS can be found here, here, here, here and here.

To summarize: I own 154 shares in the taxable account at a cost basis of $21.69. As long as I can get it for less than that cost basis (or maybe even a little more considering the tax-adjusted yield), I’m happy to try to use puts to transfer ownership to the beneficiary IRA.

I have updated the portfolio and income tracker back at the mothership to reflect this position.

Dividend Cycle

GPS will go ex-div on 10/3/16, a few days before this trade expires. Management left the payout at $0.23/share, which was disappointing, but understandable. Even with the flat dividend payout, the company maintains its status as a dividend contender.

It would have been nice to get an expiration before the ex-div so I could get the benefit of a payout if I’m assigned, but the yield/downside offerings weren’t that attractive for the 9/30/16 expiration.

Oh well. The premium exceeds the dividend payout by about $6, and obviously has a much shorter duration than a whole quarter..

Investment

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SPL (Strike Price Logic)

Strike price logic from last time justified a $21.50 price. This is a slightly lower strike with an equivalent amount of downside protection and a bit more annualized yield. 

Hell yes.

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