I have two new trades this morning.
music selection: “Back In The U.S.A.” — Linda Ronstadt
weigh-in: 205.2 (1.2)
No positions expired over the weekend. I have seen some nice recovery since the correction ended. The UVXY puts remain well underwater however.
Brighthouse Financial (BHF) is an insurance and annuity provider that was recently spun off from Met Life. They came out the gate reporting an accounting loss that appears to have hurt shares. This is to me irrational as most of the P&L in the first quarter was non cash spin off related charges. In addition, sales of annuity products grew about 25% in the first quarter. The company is clearly more nimble as an independent than as a division of Met Life. I like the prospects for this business at the current price. Therefore, I sold BHF180420P00055000 for 2.20 a share. The trade will be in force force for 54 days and yields an expected 27.04% annualized while enjoying 5.66% downside protection. I’ll be glad to be assigned at 55 and begin writing covered calls on the position.
Another new position is in Scott’s Miracle Grow (SMG). There is a lot of hype around marijuana stocks right now. I expect most pot investors are going to get burned. I still want exposure to the space so I’m going with a classic “picks and shovels” play. Scott’s has a fast growing indoor and greenhouse gardening segment that sells both nutrients and equipment. It is a high margin business that is capturing the leading market share when it comes to supplying marijuana growers. To that end, I sold SMG180420P00090000 for 1.90 a share. The trade will be in force for 54 days and yields an expected 14.27% annualized while enjoying 3.30% downside protection. Assignment would result in being eligible to collect a dividend stream that currently exceeds 2% and grew at a rate greater than 10% from 2016 to 2017. Covered calls for bonus income would also be an option. I think there is very little downside for SMG.
Devour your prey raptors!