ORCL — Fair-Value Anchored Capital Extraction | Value-Trades

ORCL — Fair-Value Anchored Capital Extraction

This case shows how long-dated capital extraction works when applied to a high-quality, overvalued business with a clear fair value anchor. Here, Oracle was trading around $258.64 while your conservative fair value was ~$190.00 per share. Instead of using rich cash-secured puts far above fair value, you engineered a deep ITM covered call project that:

  • Pulled out large, bankable premium up front,
  • Reduced your true economic cost to below fair value (≈ $166.74), and
  • Later upgraded the project by rolling the strike higher while keeping most of the premium.

The result is a structure that aims for roughly 20.55% annualized return on locked capital, with your real risk per share aligned near (or below) your own valuation instead of the original market price.

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Why this ORCL extraction works

On entry, you owned 200 shares of ORCL at $258.64, investing $51,728.00. Oracle looked clearly overvalued vs. your fair value of $190.00, but quality and survival risk were low. Instead of chasing small monthly calls, you opened a deep ITM LEAP covered call and later rolled it higher:

  • Original strike K₁ = $190.00, premium P₁ = $111.00 per share.
  • Later roll to K₂ = $250.00, net premium kept = $91.90 per share.
  • Economic cost (locked capital) became $166.74 per share, which is below your fair value and adds extra downside cushion.

Broker Cost Basis

$258.64 /sh
$51,728.00 total

Fair Value Anchor

~$190.00 /sh

Locked Capital (Economic)

$166.74 /sh
$33,348.00 total

Net Premium Kept

$91.90 /sh
$18,380.00 total
Important: The 49.93% total return and 20.55% CAGR shown here measure only the final profit vs locked capital on this ORCL project itself. They do not include two major advantages of the framework:
  • The net premium of $91.90/share released as float and redeployed into new trades targeting 14–20%+ returns, and
  • The fact that your true economic risk is from ≈ $166.74 (below fair value), not from the original market price of $258.64.
In practice, these layers make the overall economic benefit of the trade significantly higher than the project-only profit suggests.

Effective sale & upgrade

Original Effective Sale (K₁ + P₁) $301.00 /sh
New Effective Sale (K₂ + Net Premium) $341.90 /sh
Upgrade in Exit Price +$40.90 /sh
Profit vs Cost Basis $83.26 /sh
Total Return vs Locked Capital 49.93%
Annualized CAGR (vs Locked Capital) 20.55%
Framework verdict: ORCL passes the Fair-Value Anchor Rule (locked capital at or below fair value), meets the quality/survival test, and is designed to meet or exceed the 14–20% annualized target on locked capital, before even counting float redeployment. This is a model capital extraction case.

Float compounding on $18,380.00 released

The net premium kept on this ORCL project — about $18,380.00 — functions as reusable float. While your ORCL capital works toward a fair-value-anchored exit around $341.90 per share, this cash can be redeployed into new CSP or extraction projects aiming for 14–20%+ returns.

Monthly Rate Future Value @ 26 mo Float Gain
1.00% $23,806.81 $5,426.81
1.50% $27,068.40 $8,688.40
2.00% $30,757.42 $12,377.42
3.00% $39,638.15 $21,258.15

Key Numbers (Recap)

Shares200
Broker Cost Basis$258.64 /sh
Fair Value (Your Estimate)~$190.00 /sh
Locked Capital (Economic)$166.74 /sh
Current Strike (K₂)$250.00 /sh
Net Premium Kept$91.90 /sh
Effective Sale (K₂ + Net Premium)$341.90 /sh
ExpiryJan 17, 2028 (26 months)
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Disclaimer: Educational illustration only; not investment advice. Options involve risk. Use margin and float prudently. Apply capital extraction only to businesses with clear fair value and high survival confidence to expiry.