Hi Debt Free,
Every one bashes T, then their earnings come out and they beat.
T is a serial sandbagger and during the webcast, they project caution but state they're confident the numbers will be better than guided.
Post earnings seems to be when the stock gets a bid.
Then all the negative barrage comes out.
I've been selling puts on declines into 27ish, and going out far in time.
You get the cash up front, and price finds support when yield is 7% plus.
I'm guessing the dividend mutual funds like to buy there and do some of the bashing to get it there.
My last puts sold were for March 26's. Sold them on 9/23 for $1.38 so went 6 months out and if assigned net purchase price = $24.62. $2.08/$24.62 = yield of 8.44%. Mutual funds will move in to support the price before that is reached.
So in lieu of CD or MMF's $1.37/ $24.62 (premium / net purchase price)= 5.56458%/.5 (6 months)= 11.129 % annualized.
This gets you then cash up front, and time decay(of shorting a put sold) is on your side.
In time decay I trust! every year
Going further out in time maximizes premium so if assigned , your yield is higher.
Time decay is less the further out, but it is conservative. If I want to buy the stock I'll go out 30-60 days and sell a closer strike price.
If I can get 5-7 percent in this market, that's winning.
Patient and methodical return on your cash has so far been a solid plan for me - but it has also been a bull market , excepting energy.
It's a simple plan, often many like to get so complex with options.
In a bad market, where fear works against you, I look at the swings of premium (which are scary at times) and then say, would I like to buy the stock and get an annual income of 5-7% every year out in time?
It takes the fear out of the market for me. I also like the lower tax rate for dividends.
In truth, the annualization is not completely accurate, since one can not duplicate the premium for each day of the year. As you watch more and more dividend aristocrats, there are always other stocks doing the same thing.
If you buy a stock and get underwater on it, reapply the dividend stream and buy more shares at a discount.
My comfort level of holding a stock is my cost basis, minus one to two years of dividends.
Energy was such an one off, I decided to go for it and make it a long term buy and hold.
Today I got 1500 shares of XOM assigned to me early ( 10 January puts I sold back in 7/21/2020 for $16.55 (in my comfort zone) and 5 I sold 8/23/19 for 4.55) erg
I try to sell the puts in thirds. One third at a strike price I'd like to get the stock. another third when the fear boosts the premium, the last third at a lower strike price, that helps me buy those assigned.
I have some January 2022 XOM's at 35 and 37.50. If they cut the dividend by 50%, I'll still be getting my 5 to 6 %,or they'll help me pay for the ones I've just bought a year later.
Hope that helps!
Bob |
