I Bought Put Options – Messy Investments

Disclaimer:  Yes, I bought put options.  This is not financial advice.  Options involve risk and are not suitable for all investors. (They are probably not suitable for me!)

i bought puts messy money
Is this yours by any chance?

There are two luxury brand trends that I have been watching with interest – yoga wear and expensive handbags.  I even wrote about it here.

I don’t dispute the utility of these items – I have difficulty with the “bandwagonishness” of it all.  I don’t know how else to describe it and maybe I have just created a new word.

Lately, I have noticed that things have been changing on the luxury front. These findings are not scientific but notable:

1. The Moms in my neighbourhood are no longer wearing yoga pants as day-to-day casual wear.

2. I am seeing more and more UA logos and less Lulu.

3. MKs handbags seem to be the new IT bag.

4. I see coach bags more and more at the discounters, such as TJ Maxx.

In my opinion, two brands, Lululemon and Coach, have jumped the shark. People that invested in these companies a few years ago- cannot complain.  They have seen some excellent returns.  Back in 2009 a friend whispered in my ear –

Buy Lulu – you won’t regret it.

I didn’t jump on that little stock tip – because I didn’t understand the appeal of yoga apparel.  Ouch! Maybe it was because I still have memories of a little exercise fad called Pilates?

I missed out on money while these stocks were on the way up.  So to be spiteful I decided to dabble in the options market to try to make profits while the stocks are on the way down.  I bought puts on both Lulu and Coach because I am convinced that these are two dying trends/brands.

I Bought Puts

(Equity) puts are contracts that allow the person buying to contract to sell a certain amount of shares (usually 1 contract = 100 shares) in the future at the price set in the contract.

The person buying the contract pays a little premium for that right.  If the stock declines the put will generally become more valuable because you have a contract that locks in your sale price.  If the stock goes up above the price set in the contract, you are unlikely to exercise that right, because you will get more money selling at the market price.  In that case, the cost of the put contract is a total loss and the cost of dabbling in options in the first place!

The seller of the contract has to be prepared to accept (buy) the shares at the price set in the contract if the buyer decides to exercise their right to sell.  If the market price is falling, the contract seller may end up paying more for the stock than what it is worth in the market.  Yuck!  But if the stock goes up, well, they get to pocket the money they made selling the contract and go on their merry way.

Make sense?

Anyway, if you are interested in the finer details of buying a put contract can visit the CBOE website and look under strategies> buying puts.  I would provide a link but I am afraid.

Back in April I bought puts on those companies I mentioned above.  Between April and June, they had both fallen by more than $10 each.  I have since sold said puts and I did not lose money. (Miracle!)  I might even be able to take the profits and treat the family for a nice dinner.  Here is a pretty graph of the decline.I bought COH LULU puts messy money

Google finance chart

 

I also bought and inexpensive expensive handbag!

Anyway – this brings me to the expensive handbag in the picture above.   A few weeks ago, I made a trip to the local thrift store to see if they had any knitting needles.  (A long story….)  While I was there, I happened to take a look at the purses while my son was driving the clerk at the video game counter crazy.

I spied a leather handbag in the bunch.  It was brand new – not a mark on it and the lining was pristine.  It was Italian made, genuine leather, immaculate construction – the real deal!  I bought it for $18.

The purse is sitting in my closet.  I can’t bring myself to carry it.  The purse is real but I feel like a fraud.  How can I carry a $500 handbag when it contradicts my anti-bandwagon belief system? Sigh.

Thanks for visiting!

8 Comments


  1. While I’ve studied calls and puts over and over again in school I’m too scared to actually invest in them. I bought LULU on the way up and sold it for a decent profit that I’m happy with. It’s hard to read where the market is going but it seems like you have a knack for it!

    Reply

    1. There are some “prudent” option strategies that can help if you have a large portfolio – but I think that many people use them as a way to gamble. LOL. The market is tough to call even for the pros.

      Reply

  2. I have long considered venturing into the options world. I have read quite a few blogs and follow some bloggers that post their trades. For now I am still not at the appropriate comfort level I’d like but what I do know is that my first trades would be to write covered calls or write puts. To me those two strategies might be best for options newbies. Thanks for sharing your options adventure with us.
    DivHut recently posted…August Stock ConsiderationsMy Profile

    Reply

    1. I know a few people that have made a small fortune trading options but I know even more that have blown up their portfolios. I wrote some covered calls back in the winter when the market was correcting – to try and bring in some additional income- but it didn’t work out the way I had hoped. The market recovered and I got called. Oh well it was a chance I was willing to take.

      Reply

    1. Risky indeed! But fascinating at the same time. That reminds me I need to come join Savvy Saturday. Thanks for stopping by!

      Reply

    1. I am thinking about sending it to a consignment store or maybe eBay and let somebody love it. Thanks for stopping by!

      Reply

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