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Final follow-up – Profiting from a Potential Drop in the Price of Domtar Corp. Shares

Martin Noël
December 19, 2016
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Final follow-up – Profiting from a Potential Drop in the Price of Domtar Corp. Shares

Underlying asset

 

Domtar Corp. (UFS)

Domtar is a Quebec paper producer with its head office in Montreal. It is the third largest North American manufacturer of office paper. Domtar also owns forests, which figure among the best managed based on the principles and criteria of the FSC certification and labelling system.

 

This week, we present a follow-up on the position we took in the August 15, 2016 article. At that time we expected the price of UFS shares to fall, and adopted a target of $44. The put providing the best return if the stock reached $44 on expiration was the in-the-money put UFS 161216 P 50, at $3.70, with a potential return of 62.16% if we succeeded upon expiration on December 16, 2016. Consequently, we carried out the following transaction:

  • Buy 10 put options, UFS 161216 P 50, at $3.70
    • $3,700 debit

 

The price upon expiration on December 16, 2016 was $52.52, rendering the options worthless. Consequently, a loss of $3,700 must be recorded for this position.

 

Good luck in your trading, and have a good week!

 

The strategies presented in this blog are for information and training purposes only, and should not be interpreted as recommendations to buy or sell any security. As always, you should ensure that you are comfortable with the proposed scenarios and ready to assume all the risks before implementing options strategies.

 

Martin Noël
Martin Noël http://lesoptions.com/

President

Monetis Financial Corporation

Martin Noël earned an MBA in Financial Services from UQÀM in 2003. That same year, he was awarded the Fellow of the Institute of Canadian Bankers and a Silver Medal for his remarkable efforts in the Professional Banking Program. Martin began his career in the derivatives field in 1983 as an options market maker for options, on the floor at the Montréal Exchange and for various brokerage firms. He later worked as an options specialist and then went on to become an independent trader. In 1996, Mr. Noël joined the Montréal Exchange as the options market manager, a role that saw him contributing to the development of the Canadian options market. In 2001, he helped found the Montréal Exchange’s Derivatives Institute, where he acted as an educational advisor. Since 2005, Martin has been an instructor at UQÀM, teaching a graduate course on derivatives. Since May 2009, he has dedicated himself full-time to his position as the president of CORPORATION FINANCIÈRE MONÉTIS, a professional trading and financial communications firm. Martin regularly assists with issues related to options at the Montréal Exchange.

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