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A Blackstone option play



March 04, 2013 – Comments (12) | RELATED TICKERS: BX , ACAS

One thing I love doing is selling puts on companies I already own or want to own but at a discount.  Personally I sold January 2015 $17 puts on BX and received an average premium of around $3.  Last one traded at $2.95 (which was me adding to my position).  Well worse case BX goes bankrupt and I ride the loss all the way down.  First BX is solid financially and 2nd I would close the position if I ever sensed BK.

Realistically either I am forced to buy the stock for $17 come January 2015 (stock currently sells for $18.70) or I can string out the option selling 2016 ones and buying the 2015 if the stock is trading under 17.  Personally I suspect BX will be selling for over $20 by then.

Their AUM is around 210 Billion dollars and growing.  They have aggressively bought up distressed  real estate and even made a big play into liquid natural gas exporting with Cheniere (LNG).

Something for you more aggressive Fools out there to consider.

12 Comments – Post Your Own

#1) On March 05, 2013 at 2:06 AM, Valyooo (34.62) wrote:

I don't understand why anybody does not do this.  If you have a price target you want to buy at, why not get paid to wait?

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#2) On March 05, 2013 at 8:52 AM, awallejr (35.54) wrote:

Well you do lose on the upside if the stock keeps or stays above your strike price.  But on the other hand you can always rinse and repeat and keep the premiums.  The one thing that you do have to watch out for is bankruptcy.  I learned my lesson with ATPG here.  Do not play with debt heavy companies with this strategy.

The 2 I have mentioned lately have been ACAS and now BX. Buying the common outright I would advise but selling puts is another way to go.

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#3) On March 09, 2013 at 1:24 AM, BlueCollarTrade (35.90) wrote:

I like the strategy, but why do you sell the Puts so far out to JAN 2015?   

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#4) On March 09, 2013 at 2:20 AM, awallejr (35.54) wrote:

I like the higher premiums.  I tend to string out puts in January of each year.  I have a bunch due in 2014 for different stocks as well as 2015.  Once 2016 opens I will sell those as well.

So far ACAS and BX are working out great and I expect to keep the total premium due by that time period.  Of course I can always close out the position sooner but I honestly think these 2 will be selling for more than their strike price come 2015.  And if not I am willing to be put the common at the strike price (highly doubtful).

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#5) On March 09, 2013 at 7:40 PM, BlueCollarTrade (35.90) wrote:

I admire that you can sell premium that far out.  I like to sell options in shorter cycles.   That probably means I stare at the Trading screen too much!   

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#6) On April 12, 2013 at 12:16 PM, awallejr (35.54) wrote:

If anyone listened to me you might want to take some profits. If you got around $3 per option you can close some out at $2.25. A heck of a nice profit return.  I wouldn't close it all out since I think BX will still be selling above $17 by Jan 2015 but that is assuming no major black swan events.

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#7) On April 12, 2013 at 12:17 PM, awallejr (35.54) wrote:

Oh and remember to always use limit orders!

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#8) On April 12, 2013 at 1:44 PM, drgroup (68.02) wrote:

BX is hovering around $21. Good play. But help me out here. If you get a 3$ premium/option, does that mean you net $3 or $300(1 option holds 100 rights). I haven't dabbed in options yet, still leary of the mechanics. Like your stragey though.

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#9) On July 26, 2013 at 11:22 PM, awallejr (35.54) wrote:

Sorry just noticed your question.  The answer is yes.  You are given $3.  However you are obligated to buy the stock for, in this case, $17.  So as long as the stock trades above $14 you will make money.  As of this writing, BX is selling for over $23.  The option is trading for about $1.50ish.  So if you close it out you made 100% return.  If you just held it to maturity I suspect it will expire worthless, again absent any black swan event.  So you keep the full $3.

This is what I like about selling puts.  The worse case is you are obligated to buy stock in a compnay you like at a discount.

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#10) On July 26, 2013 at 11:25 PM, awallejr (35.54) wrote:

And the $3  is $300 per 1 contract. Personally I trade in chunks of 10 contracts, so $3000.

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#11) On July 30, 2013 at 4:34 PM, drgroup (68.02) wrote:

Thanks for clarifying. Time to pull the trigger now... 

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#12) On October 30, 2013 at 2:11 PM, awallejr (35.54) wrote:

Closed the position.  Sold 30 BX puts for total of $9,000 and closed it at .71 for 2,130 total profit $6,870.

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