Five trades made this morning.

music selection:  “Dream Ridiculous Implausible” — Jane Jensen

weigh-in:  211.8 (0.2)

Shares of Suncoke (SXCP) were assigned over the weekend.  I’m delighted to collect the 13.37% distribution yield.  I’m enhancing yield with a covered call.  I sold SXCP170217C00020000 for 20 cents a share.  The trade will be in force for 26 days and  yields 14.04% annualized.  The five contracts add 100 dollars in premium income for the month of February.

Also expiring in February is a new covered call in Genesis Energy (GEL).  I sold GEL170217C00037500 for a nickle a share.  The trade will be in force for 26.  It only yields 1.87% annualized but that is all bonus yield on top of the underlying distribution, yielding 8%.

Rounding out February expiries is Mid America Apartments (MAA).  This is a mezzanine level apartment provider operating as a REIT.  It has a low yield but a lot of potential for price appreciation.  I sold MAA170217P0009500 for 3.10 a share.  This trade will be in force for 26 days.  It yields an impressive 45.81% while enjoying 4.45% downside protection.  I’m very happy with the extra 310 dollars in premium income that will be earning in February.

A covered call in Seadrill Partners (SDLP) expired out of the money over the weekend.  I opened a new one to earn more premium income.  I was able to sell SDLP170317C00005000 for fifteen cents a share.  This trade will be in force for 54 days and yields 20.28% on an annualized basis.  I expect to continue collecting the underlying distribution yielding 9.48%, as well.  I sold 13 contracts here and accumulated 195 dollars in premium income for March.

I did my best to sell a covered call at the February and March expiries in Prospect Capital (PSEC) but couldn’t find any liquidity.  I’ll try again tomorrow with an expiry further out.

Finally, I initiated a new position with a written put in General Electric (GE).  GE has been on my radar for some time.  I’ve primarily been waiting for them to finish divesting themselves of the disastrous GE Capital and also to shed the Systemically Important Financial Institution regulatory designation.  Both of those goals are now substantially complete.  The company has a much better balance sheet now and should enjoy higher margins across its remaining businesses.  I also remain bullish on the prospects for their new industrial product operating system Predix.  This new software could do for industrial machinery (and GE) what iOS did for cellphones and Apple.

I sold GE170303P00030000 for 87 cents a share.   The trade will be in force for 40 days and yields 26.46% on an annualized basis.  The trade also sports 1.85% downside protection against a fall in share price.  I went slightly in the money with the intent of getting assigned and writing out of the money covered calls to generate a small amount of income while I wait on long term price appreciation.

Devour your prey raptors!

 

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Monday trades: SXCP, SDLP, MAA, GEL, GE

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3 thoughts on “Monday trades: SXCP, SDLP, MAA, GEL, GE

  • January 24, 2017 at 4:38 pm
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    Looks like you’re pursuing a bit more balance between selling calls vs selling puts. Are you positioning the overall portfolio to be neutral to market moves?

    Also, your covered call approach to energy companies might imply that you see limited upside to oil prices. I can imagine a rationale for that. The new administration will be subsidizing/deregulating energy infrastructure at the same time they trigger retaliatory tarriffs that will curtail US energy exports. Oil prices could fall, and investor expectations could precede such an event by many months. Is this the case, or are energy companies just where the yield is in a short-term sense?

    Reply
    • January 24, 2017 at 9:46 pm
      Permalink

      The balance sought is between income from options and income from distributions. Specifically, I want to meet my full budget from distributions so options income is unnecessary and a bonus. I think oil will trade in a narrow range for a long time. The United States is the new swing producer and has thousands of drilled but uncompleted wells in inventory. Any price spikes will lead to swift additions to existing production. OPEC would have to cut itself into deep austerity to move the price up significantly from here. But mostly, energy is just where I’m finding yield. I’m high on the prospects for the midstream space under Trumpy.

      Reply

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