Lululemon, Inc. – Sold PUT Options

Lululemon has been publicly traded since 2010. In the sixteen and a half years of activity, it has yet to lose a single dollar. Furthermore, its gross margin has never dipped below 50%. No other athletic clothing retailer can make this claim. For comparative purposes, Nike’s gross profit margin is in the 40% range. Below are Lululemon’s 16.5 years of cumulative earnings:

Revenue                       $75.8 Billion
Gross Profit                   42.6 Billion (56%)
Net Profit                     $10.9 Billion
Earnings/Share           $86 (Averaging $5.21/YR)

Lululemon Inc. will earn at least $11/Share in Fiscal Year 2026. Thus, at a 14x P/E ratio, the stock is worth around $154/Share. It is currently trading at less than $100 per share. PUT Options are similar to insurance contracts for the buyer. The seller, in this case, the Value Investment Fund, receives cash and guarantees to buy the stock from the owner of the PUT if the owner decides to exercise the Option. In this transaction, the PUT Option has a strike price of $100 and can be exercised by the owner up until December 18, 2026. The Fund sold 300 options at $9 each and must pay a $1/Option transaction fee. The Fund nets $2,400 from this sale.  

The Fund would love to own Lululemon at $100/Share. Act on Knowledge.