Excluding commissions, if you bought 2,000 shares of Tyco at $12.00 and then months later sold 20 of the Jan. '04 LEAPS with a 20 strike for $610 each, the net cost of your positions would be $11,800. Your breakeven for Jan. '04 would be $12.95 per share. The calculation (excluding commissions) is:
1) Sell 2,000 shares at $12.95 for proceeds of $25,900.
2) Buy back the 20 puts at expiration at $705 each for a cost of $14,100.
The difference between the share sale and the LEAP buyback would be $11,800 - which matches your net proceeds when you bought the stock and sold the option.
Please not though, for me the naked puts aren't that significant. I don't have out-of-the-moneys that sell for $610. Aside from my 5 January 20 puts, all of my puts are only for one month and currently go for no more than $105 each. When I SELL options (including puts), its' always very short term. You do much better in options when you sell the short-term options. When you BUY, however - with serious money as opposed to "mad money," you want to be in the in-the-money LEAPS.