I sold three covered calls today.
music selection: “Fortress Around Your Heart” — Sting
On Monday, I failed to sell covered calls in Penny Mac (PMT), Seadrill Partners (SDLP), and Suncoke (SXCP). I went further out on the expiry today and found some liquidity.
PMT is one I’ve held for some time and written multiple calls against. It trades in a tight range while paying a fat distribution, making it perfect for a covered call strategy. I sold PMT170721C00017500 for 35 cents a share. The trade will be in force for 124 days and yields 5.89% annualized. The underlying distribution is another 10.97%.
SDLP is the best in class offshore drilling rig MLP. With oil prices subdued, it is struggling and I may have to cut bait on this one and run. Until then, I will try to reduce my risk and improve my returns with covered calls. I sold SDLP170915C00005000 for 15 cents a share. The trade will be in force for 180 days and yields 6.08% annualized. The underlying distribution, which I am likely to collect, is 11.87%.
SXCP is an MLP provider of metallurgical coal. Financial results are strong but the stock is struggling while the general partner makes low ball offers to purchase the remaining shares. I expect shareholders to reject the offer and the price to recover somewhat. I sold SXCP171117C00020000 for 40 cents a share. The trade will be in force for 243 days and yields 3.00% annualized. The underlying distribution pays an additional 15.23%.
Devour your prey raptors!