Best Stock on the Market

Put Spread on CMI on 5/24/2013

Cummins Inc. is a diesel engine manufacturer. The Company designs, manufactures, distributes and services diesel and natural gas engines, electric power generation systems and engine-related component products, including filtration, exhaust aftertreatment, fuel systems, fuel systems, controls systems, air handling systems and electric power. The Company sells its products to original equipment manufacturers (OEMs), distributors and other customers worldwide. It serves its customers through a network of more than 600 company owned and independent distributor locations and more than 6,500 dealer locations in more than 190 countries and territories. It has four segments: Engine, Power Generation, Components and Distribution. In April 2011, the Company sold its exhaust business to Global Tube. In July 2012, the Company acquired the emission control assets of Hilite International in Marktheidenfeld. The Hilite assets are part of Cummins Emission Solution (CES).

Stockwinners is bearish on this name for the following reasons: 

  1. The stock seems to be headed lower after market peek. This name failed to make a new high along with the rest market and is poised to move lower in any weakness in the market.
  2. the payoff seems very attractive

(note: please refer to our other trade on CMI on April, 05)

Trade

  • Buy 1 July $110.00 Put at $2.40
  • Sell 1 July $105.00 Put at $1.30
  • For a net debit of $1.10

Profit/Loss Analysis

  • Breakeven at $108.90
  • Maximum profit is $390.00 at strike of $105.00
  • Maximum loss is ($110.00) at strike of $110.00

Closing Summary

  • Sold 1 July $110.00 Put at $2.65
  • Bought 1 July $105.00 Put at $0.80

Position closed on 7/5/2013 at price of $1.85 with a 68.18% gain in 41 days.

Updates

5/24/2013 11:07:12 AM

Note in the original write up, it mentioned that the options are for May expiration however, the correct expiration month is July. We do appologize for any inconvinience.

7/5/2013 10:29:59 AM

Using today's weakness, We are closing the CMI position.

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