Citigroup Inc (C)

[Enterprising Investor]

NexPoint Credit Strategies Fund: Options Worked (9/21/17)

Summary

•NHF is a closed-end fund sponsored by Highland Capital & NexPoint Advisors, primarily invested in below-investment-grade debt and equity with the ability to hedge risk.

•The Nexpoint Credit Strategies Fund currently yields an income-only distribution of 10.52% and trades at a discount of 7.50% to its net asset value.

•We take a look at various metrics and changes in the fund as learned from the recently published Semi-Annual Report.

•A look at leverage of the fund.

•Income Idea subscribers received a more detailed analysis along with an in-depth thoughts beyond the numbers and implementation ideas, more than 2 days ago.

[...]

The solid big win however where the fund has won on both sides of the trade on Citigroup.

The fund has purchased some time ago 9,700 Citigroup September 17th, 2017, $65 call options for $2.282 million. Assuming they were held until expiration, the options would be worth more than $4 million at expiration just last week (buying a call gives the holder the "right" to "buy" at the strike price. i.e. need price to go up).

At the same time, the fund "wrote" the same September 17th, 2017, Put options with the same $65 strike price and have received $754,828 in premiums. When you write an option, you now have the obligation. With Put options, the owner has the right to sell you the shares at the specified price. The fund as the writer had the obligation to buy shares at the $65 if the options were exercised. As the price of Citigroup went over $65, the put options would expire worthless.

https://seekingalpha.com/article/4108655-nexpoint-credit-strategies-fund-options-worked