I rolled covered calls on DCP Midstream Partners LP (DPM) on Tuesday.
music selection: “The Last High” — The Dandy Warhols
My old DPM covered calls at the 22.5 and 30 strikes expired worthless over the weekend. When the markets opened on Tuesday, I replaced them. There wasn’t much liquidity at the near expiries so I went out to April. I sold DPM160415C00022500 for 70 cents a contract and DPM160415C00025000 for 35 cents a contract. Both contracts will be in force for 89 days. The 22.5 strike yields 12.76% annualized and the 25 strike yields 5.74% annualized. The 25 strike would result in a 5 dollar a share capital loss in the unlikely event it triggers. I should also collect an additional 78 cents a share in distributions during the expiry period for another 12+% yield. Can’t beat that with a stick.
This one is a little beaten up and I think the market is being a little bit irrational. The financials are sound and there is very little commodity pricing exposure for this midstream operator. I expect to do well here.
Devour your prey raptors!