One way to make a little money is to sell/write December puts on The Buckle (BKE).
Quotes for BKE - Yahoo! Finance
The December $37.50 strike is selling for $2.10.
BKE121222P00037500: Summary for BKE Dec 2012 37.500 put- Yahoo! Finance
The idea here is that the seller gets $2.10 up front and has the option to buy BKE @ $37.50 p sh, on or before the 3rd Friday of December.
If the price falls to $37.50, The Buckle is a fair buy @ $35.40 ($37.50 - $2.10).
If the price doesn't fall to $37.50, the investor just pockets the $2.10.
The Buckle has distributed a special dividend on top of their regular distribution in each of the last 3 years: $2.45 p sh (2011), $2.50 p sh (2010), and $2.00 p sh (2009) respectively. Another distribution of $2.00-$2.75 p sh is expected in 2012.
Why?
INSIDERS own over 40% of the company. The difference in taxation rates between "salary" and "dividends" is massive. Insiders would rather rake in $1m in dividends instead of $1m in salary. I don't blame them.
In general, The Buckle keeps their cash holdings around $100m give or take a dozen million. Since they have over $200m at this time, they will bleed it out to shareholders in order to minimize drag on returns on equity and returns on assets.
Unfortunately this dividend doesn't benefit option players directly.
The same strategy can be used more aggressively for the 3rd Friday of September in the hopes of a) getting the option money $, b) getting put the stock $$, and c) scoring the special dividend $$$. That would be the ideal scenario.
Disclaimer: I've held The Buckle stock for almost 6 years.
Quotes for BKE - Yahoo! Finance
The December $37.50 strike is selling for $2.10.
BKE121222P00037500: Summary for BKE Dec 2012 37.500 put- Yahoo! Finance
The idea here is that the seller gets $2.10 up front and has the option to buy BKE @ $37.50 p sh, on or before the 3rd Friday of December.
If the price falls to $37.50, The Buckle is a fair buy @ $35.40 ($37.50 - $2.10).
If the price doesn't fall to $37.50, the investor just pockets the $2.10.
The Buckle has distributed a special dividend on top of their regular distribution in each of the last 3 years: $2.45 p sh (2011), $2.50 p sh (2010), and $2.00 p sh (2009) respectively. Another distribution of $2.00-$2.75 p sh is expected in 2012.
Why?
INSIDERS own over 40% of the company. The difference in taxation rates between "salary" and "dividends" is massive. Insiders would rather rake in $1m in dividends instead of $1m in salary. I don't blame them.
In general, The Buckle keeps their cash holdings around $100m give or take a dozen million. Since they have over $200m at this time, they will bleed it out to shareholders in order to minimize drag on returns on equity and returns on assets.
Unfortunately this dividend doesn't benefit option players directly.
The same strategy can be used more aggressively for the 3rd Friday of September in the hopes of a) getting the option money $, b) getting put the stock $$, and c) scoring the special dividend $$$. That would be the ideal scenario.
Disclaimer: I've held The Buckle stock for almost 6 years.
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