My previous strangle of PMT expired out of the money over the weekend.
music selection: “Talk To Me” — Stevie Nicks
weigh-in: 216.8 (1.2) – Finally! Some progress
PennyMac is a nice little REIT that is currently a hedge fund darling. It yields over 13%. It also has options so I’m cleaning up on income here. For the covered call leg, I sold PMT160520C00015000 for a nickle. It doesn’t yield much, 3.69% over 33 days, but its bonus yield above the fat dividend stream.
For the written put leg, I sold PMT160520P00012500 for 20 cents a contract. The annualized yield is 17.70% over 33 days. The trade enjoys 8.14% downside protection. It seems unlikely I will get assigned here but I will be very happy if I am.
Devour your prey raptors!
Strangle PennyMac (PMT)
Any idea why the yield is so high for the stock? What is the reason for the stock being low compared to 2013 peak?
I think it is just typical of the REIT space right now. They have tax incentives to pay a large portion of cash in distribution. There is some perceived interest rate risk if the Fed starts raising rates so prices across the sector are down.