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Strategies & Market Trends : Option Strategies
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To: Clam digger who wrote (1937)5/11/2018 6:45:56 PM
From: robert b furman2 Recommendations

Recommended By
Thehammer
Truedarkblue

  Read Replies (1) of 2591
 
No.

I've sold puts on T for over 3 years - never had to pay a dividend.

I'm going to bare my soul here - I'm scared to death about shorting a stock - the unlimited liability just works on my mind when I'm upside down.

But when I sell a put and know what my adjusted cost is and it yields 5 % plus - I'm OK.

The market can go to zero and I'm OK because I'm going to get that dividend.

Now with that rosey scenario - there is one really bad event - the company reduces or suspends the dividend.

The type of stock holder that buys these high yielders , sells first and asks questions later.

An example - I had sold a lot of puts on KMI - the nation's largest gas pipeline operator.

When they went from a 2.00 dividend to 50 cents the stock holders sold if off hard..

I sold puts down to 12.50 and recovered a small portion of my investment.
I held on a loser believing that prices would normaliz and get back to what it costs to develop the resource.

Reasonable but longer term.

I've sold 15's 16's and 18's for an equal number of share I had before.

So it has been a rough 2 years, but I like the stock and I believe pricing will come back.

KMI has said they'll increase the dividend from 2017 to 2018 from 50 cents to 80 cents aND 2019 TO 1.00 AND 2020 TO 1.25.

IF THAT HAPPENS AND I GET PUT AN EQUAL NUMBER OF SHARES I'LL HAVE A YIELD OF 5.44 PERCENT.

I'm OK with that and if they get to the past dividend of $2.00 I'll have a yield of 8.7%.

I'll be cruising the Carribean in my Hatteras if that happens, <smile>

Keep in mind - I'm an investor - not a trader.

I'm retired and watch the market daily.

I love selling puts on dividend aristocrats that dip to 3 year lows.

If a stock gets to the annual dividend below my cost - I'm AOK with that and probably selling puts on it more.

Its not perfect, but if I get put the stock and it pays a yield I'm happy with - I don't panic I hope I get to buy the discount.

Been doing it for 4 years and it works - truth be told I've been selling puts in a long bull market and I not been assigned many stocks , but have made a lot of premium money some of it over 12 months and taxed as capital gains.

The central most important thesis to this kind of investing is - IF PUT TO YOU - YOU WANT TO OWN THE STOCK.

If the stock drops below your cost then subtract the next years dividend and still be comfotable. If it drops below that take the dividends and buy more as you average down.

Enjoy the value - unless the stocks business model has changed.

It is very simple and most importantly fear free.

Before you sell the put - you either like the dividend yield or you like the premium to net purchase price annualized.

Pick out your favorite dividend aristocrats and watch them.

If they go high - forget em and wait for them to cycle down.

It is good to watch a high number of stocks - it helps with achieving diversity.

Hope that helps - any questions - just holler.

Bob
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