I wanted to take advantage of Brexit volatility with a big options play so I wrote puts on SDLP.
music selection: “Start Me Up” — The Rolling Stones
SDLP is pretty beaten up with the downturn in the oil patch. Despite difficult times, it clings to profitability and continues to produce attractive cash flows. The underlying yields over 17% as the company continues to pay its distribution from operating cash flow. This one is a little risky, especially if the price of oil collapses again. Based on continuing declines in domestic production, I’m calling the long term price for WTI crude between 45 and 50 dollars a barrel. I think SDLP can hang tough in that range.
On the 28th of last month, I sold SDLP160715P00005000 for 20 cents a share. The trade will be in force for 18 days and yields an astounding 81.11% annualized. In addition, the trade enjoys 6.07% downside protection. I expect to do well here.
Devour your prey raptors!