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Non-Tech : Income Investing

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To: KEN2CWL who wrote (43407)	6/27/2020 10:48:49 AM
From: E_K_S	Read Replies (2) of 52048

Re: I added another 1,000 shares of CTL - hard to resist under $10 and yielding Ken to juice my income, I may write some covered calls and keep rolling those over until my high priced shares are called. The next xdiv date for CTL is 8/29/2020 for $0.25 after that is 11/29/2020 for $0.25. I was looking at selling some covered calls through 1/21/2022. The strategy is to do a dividend capture (two div @ 0.25 =$0.50/share) writing a January $12.00 2022 covered call. I believe fair value for CTL is $18.50/share based on the GN calculator. GN uses current BV=$12.20/share and 2022 earnings estimate of $1.30/share. You may/could discount this for their large debt and/or uncertain growth prospects (legacy revenues falling vs cloud enterprise services growing). I have built a 3% CTL total portfolio position (in taxable and IRA/ROTH accounts) and was thinking on writing covered calls on 1/3 or 1/2 of the total shares owned. The January 21, 2022 $12.00 Call bid $1 ask $1.25 w/ previous trade at $1.37/share. The Black/Scholes fair value estimate for these Calls if/when the stock trades at $10/share is $1.30/share. Option gain/premium (for 100 shares): Target Price at $9.50 Max Gain $339.00 39.37% Static ROI $100.00 11.61% Target ROI $ 92.00 10.69% Option gain/premium (for 100 shares): Target Price at $12.00 Max Gain $339.00 39.37% Static ROI $100.00 11.61% Target ROI $339.00 39.37% Then you add the $0.50/share dividend covering two quarterly dividends Dividend yield ($0.5/$9.5) = 5.3% So if stocks closes below $12/share on 1/21/2020: Total ROI= Static ROI = 11.61% + 5.3% div = 16.9% If stock closes at $12.00/share or above on 1/21/2020: Total ROI = Max Gain = 39.37% + 5.3% div = 44.67% ------------------------------------------------------------------------------------------------------ The 10 year Treasury is yielding 0.67% and my Credit Union yielding 1%, this strategy may could yield 16.9% to 44.67% and provide 10.41% downside (to $8.61/share) My strategy is to let the stock run back up to $10.50/share - $12.50/share and look at this covered call strategy. For now, w/ days like Friday was accumulating a few more of $9.50/share to my inventory 'bucket' so in the future would be in position to do the covered call strategy and/or peel off some shares. FWIW, I try to have many different income streams I look at, all no more than 3% portfolio positions, so on each news event and/or sell off and/or rally have my strategy in place to execute the plan. Still sitting on 15% cash in the Credit Union earning 1%. I try to measure the Risk/Reward to deploy some of that cash on plays like CTL and/or dividend payers. (NOTE: some income investors like to SELL naked Puts but from my experience, I prefer buying the stocks and writing covered calls) Similar analysis could be used for T and that may be one I would set up too if I can buy T shares at/below $28.50/share. I got a few on the last sell off below $28/share. GN fair value is $44/share based on BV=$27/share and 2022 earnings of $3.30/share. Good luck to you on what ever you decide. EKS

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