Option Trading Idea: Ryder Systems Inc. (R) Cash-Secured Put

Ryder Systems (R) is hovering above its mid-September high, which is right around the 42-43 area. The company issued its quarterly results on October 22, meaning earnings news is basically out of the way through the end of the year. Investors expecting R to hold steady or skew slightly higher during the next four-to-five weeks could consider the cash-secured put strategy.

R Cash-Secured Put Trade Details:

R shares are trading at $43.03

Cash-Secured Put –

• Sell the R December 42.50 put (out-of-the-money) for $2.40 per contract
• Net credit of $2.40 ($240)
• For every contract, set aside $4,010 in cash: [(42.50-2.40) * 100]

Securing the sold put with cash means the capital is available to buy the shares if assigned. At this point, you’ll have purchased R shares at an effective price of $40.10, or 6.8% less than they are currently priced.

Profit/Loss Details:

Maximum potential profit: $2.40 per contract (the premium collected) minus commissions.

Maximum risk: $40.10 (the strike price minus the premium collected). Return on risk for this trade is 5.9% in 30 days.

Breakeven: $40.10 (the strike price minus the premium collected).

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