I opened a buy/write on HCP.
music selection: “Lights Out” — Santigold
weigh-in: 219.0 (0.2) – disappointing week
HCP is a REIT that is focused on the medical space. They particularly own a lot of nursing care homes and stand to benefit from the increasing need for long term care for aging baby boomers. The company has a long history of raising its distribution. I bought shares at 36.33 and have a yield on cost basis of 6.73%.
To juice returns, I sold HCP160617C00037500 for 65 cents a share on the 6th of May. The trade will be in force for 43 days and yields 15.17% annualized versus my cost basis. That is a potential for a combined 21.9% annualized total yield. There is potentially some interest rate risk exposure here but I think the fears the Fed will raise the benchmark rate by a large amount are overblown. At least I’m sure enough to risk hard earned money on it.
Devour your prey raptors!
You’re not worried about the HCR Manor Care spinoff? I’m not sure how I feel about it. On one hand it’s going to be good for HCP (what’s left after the spinoff), but on the other hand as a sharehder I’m just left holding the bag full of SpinCo shares. I think everyone’s going to want to dump those…but maybe that’s already priced in? How do you value something like that? I need to increase my position in HCP to be able to sell call options. Now might be the time to add so my resulting cost basis is somewhere near a decent strike.
I think management is making the decisions that ensure the distribution can continue to grow. I plan to keep any spinoffs. They tend to do well if you hold them long enough.
Good luck, I hope it works out for you 🙂
Tristan