No. of Recommendations: 6
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Purchase 100 shares of Dollar General at $68.44
Sell to Open 1 $90 Call dated January ’27 @ $9.83
Sell to Open 1 $90 Put dated January ’27 @ $28.35
Net Cash Outlay Per Share Today = $30.27
There are only 2 outcomes in this scenario:
Best-Case Scenario (If the stock closes at $90 or higher, +32% of today’s quote)
The calls will be exercised
You'll sell your original 100 shares for $9,000
You'll likely collect $472 in dividends
The puts will expire worthless
Final Position = No Shares & $9,000
Cash on Cash Net Profit = $6,446 ($9,000 - $3,027 + 472)
Total Return 213%
Annualized Return over 726 Days = 107%
Worst-Case Scenario (If the stock closes below the $90 strike)
The calls expire worthless
You keep the original 100 shares
You'll likely collect $472 in dividends
The puts will be exercised
You'll buy another 100 shares
You will need an additional $9,000 of cash
Final Position = 200 shares
Start-to-Finish Net Cash Outlay = -$12,026.50
Average Cost = $60.13 ($12,026.50/200) $60.13
Share price may fall 12% to reach the breakeven
A partial reversion to the $101 price target will turn a 32% share price increase into a 213% return. In the event shares do not meet the strike, the position can be liquidated for a positive return at any level above $60.13 or 12% below today’s quote. Owning shares at $60.13 would have been a positive position every single day since 2015 when Dollar General was generating $3.95/share in earnings.
