Sold PUTS on Huntington Ingalls Industries

Today, the Value Investment Fund sold an options contract (PUTS) for 116.9591 shares of Huntington Ingalls Industries at $5.90 per share netting $4.90 per share. The strike price is $170 per share which is 4% lower than the buy price as set for this particular member of the Military Contractors Pool. The intrinsic value of Huntington Ingalls Industries is currently calculated at $185 per share. Current market price today, January 7, 2022, is $192 per share.

As with all tranches purchased by the Value Investment Club, this particular contract exposes the Fund to a potential outlay of $20,000. The Fund currently carries over $97,000 in cash and has two existing $20,000 potential commitments for two other option contracts (PUTS on Union Pacific and Norfolk Southern Railway). One of those contracts expires on January 21, 2022.

For those of you that are members, PUTS are explained in more detail in Phase Three of the lesson sets on this site.

As evidence of the financial requirements of this transaction, here is a visual depiction of the option:

Bids are $5.90 per share for a June 17, 2022 expiration date. Thus, with a transaction fee of $1 per share (Club’s standard transaction fee for all activity), the Club nets $4.90 per share on 116.9591 shares or $573.10.

The financial obligation if required (market price drops to $169.99 per share) is to pay $170 plus $1 per share for the transaction fee or $20,000 total ($20,000/$171 each = 116.9591 shares).

For those of you reading this post, please review the following articles to fully understand why the sale of this options contract is so lucrative for the Club. The Club WANTS to own this stock at any price less than $176 per share.

Huntington Ingalls Industries – Market, Intrinsic and Value Investing Prices

Purchased Huntington Ingalls Industries

One last important note of interest. Assume this contract is enforced by the buyer. At point of purchase by the Club, the actual net investment into the shares is $171 less the net earned of $4.90 or $166.10 per share. In effect, the Club would own this stock at a 10% discount against Huntington Ingalls Industries intrinsic value price of $185. The margin of safety is $18.90 per share. Again, owning this stock at such a low price will reap long-term value for the Investment Fund. Act on Knowledge.

Past Performance is NOT Indicative of Future Returns.

Through September 30, 2024 (Click to Enlarge)

The performance information for the Value Investment Fund (the Club) has been presented as of a particular date. This site's facilitator is providing the standard WARNING about investing. The above chart's information will not reflect subsequent changes with factors that will impact the performance of the Value Investment Fund (review the market wide decline experienced in calendar year 2022). Accordingly, the performance metrics on this website should not be considered an indication of likely or possible future returns. With that said, this is also true of all other forms of investing and indices. The absolute best tool for any investor is RISK REDUCTION as explained in the FIRST principle of value investing.

Furthermore, investing is risky and as such, it is encouraged that visitors/members limit their respective capital outlays to amounts they can comfortably afford to lose or experience reductions in value.

Value Investing is a systematic process of buying low and selling high based on risk reduction, intrinsic value, financial analysis and patience. THIS IS NOT A GET RICH QUICK SCHEME; it requires thoughtful evaluation from participants.

Value Investment Club

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Value investing utilizes a buy low, sell high tenet of systematic processing of stock and other security investments. Value investing reaps substantially greater returns than all other major market measurement indices (DOW, S&P 500, Russell 2000, NASDAQ, etc.). The average annual pre-tax return is >20%. When you subscribe, you receive access to all existing articles, books, lessons, webinars and reports explaining how value investing works. In addition, each month, the subscriber receives additional articles, reports and buy/sell points for high quality stock purchases. Follow along as the fund updates regularly and discover how to invest like a pro and earn excellent returns on your investment. Subscription is for one year of access to the value investing pool of information.

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