Money and Finance
I've been looking around and have found some other potentially lucrative put option plays. All information is based off the closing values from February 10, 2012 and that the puts would be sold the morning of February 13, 2012.
The current price for Aflac is $48.33 giving a 2.73% current dividend yield.
Considering you can effectively get an 8.55% CAGR with 10% downside protection in stock price with the $44 put I find that to be a pretty good tradeoff since you would be risking the money for only 32 days. I don't think Aflac would be moving back down since the Japan issues seem to be behind them. Especially since you can get a 3.03% YOC should that option be exercised.
The current price for Target is $52.43 giving a 2.29% current dividend yield.
The $50 put is better if you don't really want the stock because the shares would have to decrease 8.87% before you would lose money on the option. Both the $55 and $57.50 puts will give you a higher return with the added chance that the option will be exercised since your effective cost basis is higher. You'll sacrifice a bit of YOC but can still get a good return should the option be exercised. The $57.50 put gives you 2.54% of downside protection while giving a 8.23% total return. Your upside is 3.25 times the downside risk which is an acceptable tradeoff for my tastes.
*Assumed 25% tax bracket and the commission costs of $8.70 that I would pay.
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It seems that the market is trying to decide whether it should have a pullback or not. This doesn't make for the best time to sell puts if you're looking to just collect the premium but if you want to get the stocks at a set price it could prove...
Money and Finance
Selling Puts for Added Income
I've been looking around and have found some other potentially lucrative put option plays. All information is based off the closing values from February 10, 2012 and that the puts would be sold the morning of February 13, 2012.
The current price for Aflac is $48.33 giving a 2.73% current dividend yield.
| Strike Price | Option Price | Cost Basis if exercised | Total Return | CAGR | YOC if exercised |
|---|---|---|---|---|---|
| $48 | $1.62 | $46.38 | 2.40% | 31.02% | 2.84% |
| $47 | $1.22 | $45.78 | 1.81% | 22.70% | 2.88% |
| $46 | $0.91 | $45.09 | 1.34% | 16.44% | 2.92% |
| $45 | $0.67 | $44.33 | 0.97% | 11.67% | 2.97% |
| $44 | $0.51 | $43.49 | 0.72% | 8.55% | 3.03% |
Considering you can effectively get an 8.55% CAGR with 10% downside protection in stock price with the $44 put I find that to be a pretty good tradeoff since you would be risking the money for only 32 days. I don't think Aflac would be moving back down since the Japan issues seem to be behind them. Especially since you can get a 3.03% YOC should that option be exercised.
The current price for Target is $52.43 giving a 2.29% current dividend yield.
| Strike Price | Option Price | Cost Basis if exercised | Total Return | CAGR | YOC if exercised |
|---|---|---|---|---|---|
| $50 | $2.22 | $47.78 | 3.20% | 7.55% | 2.51% |
| $55 | $4.65 | $50.35 | 6.22% | 14.98% | 2.38% |
| $57.50 | $6.40 | $51.10 | 8.23% | 20.07% | 2.34% |
The $50 put is better if you don't really want the stock because the shares would have to decrease 8.87% before you would lose money on the option. Both the $55 and $57.50 puts will give you a higher return with the added chance that the option will be exercised since your effective cost basis is higher. You'll sacrifice a bit of YOC but can still get a good return should the option be exercised. The $57.50 put gives you 2.54% of downside protection while giving a 8.23% total return. Your upside is 3.25 times the downside risk which is an acceptable tradeoff for my tastes.
*Assumed 25% tax bracket and the commission costs of $8.70 that I would pay.
- Selling Puts For Added Income
As promised, here are my put option plays to target a specific entry price on Procter & Gamble (PG). Procter & Gamble closed trading on 4/18/12 at $66.76. It is a Dividend Aristocrat with 55 consecutive years of raising their dividend. The lowest of their...
- Selling Puts For Added Income
Today I'll be looking at Medtronic. Medtronic's current price is $38.70 and is a Dividend Aristocrat with 34 consectutive years of raising their dividend. The lowest of their 1, 3, 5 and 10 year dividend growth rates is 8.7% with the highest at...
- Selling Puts For Added Income
It's about time for another look at possible put option moves to get a better entry price or for added income. All calculations are based off of prices from March 20, 2012. Today I'll be looking at Bank of America. I still have high regard for...
- Selling Puts For Added Income
It's about time for another look at possible put option moves to get a better entry price or for added income. All calculations are based off of the close from February 28, 2012. The current price for Waste Managerment is $35.20 giving a 4.03% current...
- Selling Puts For Added Income
It seems that the market is trying to decide whether it should have a pullback or not. This doesn't make for the best time to sell puts if you're looking to just collect the premium but if you want to get the stocks at a set price it could prove...