Another covered call in Altria (MO).
music selection: “Still Into You” — Paramore
weigh-in: 205.0 +1.0
I’ve made some good and easy money writing options on Altria (MO) in recent months. While the stock has seen a good run up, it is still undervalued in my opinion. I’m wrote a new covered call on Friday to take advantage.
I purchased 100 shares at 56.37 on 12APR2019. At the same time, using a combo order, I sold MO190524C00056000 for 2.14 a share. The trade will be in force for 43 days and yields an expected 32.22% on an annualized basis. If shares are called, I will book a short term capital loss of 37 cents a share. That will reduce the annualized return to 26.65% against my cost basis of 56.37. Still a very good return on a stable a mature stock with a good runway ahead of it.
Long time Raptor readers will notice that once again, I have written a covered call at the first strike in the money. This reduces risk. I am playing more defense lately with the yield curve flirting with inversion. I am also positioning myself to raise cash for the inevitable opportunity in Fallen Angels bonds that get downgraded from investment grade to the highest level of “junk.” Forced selling by institutional investors that are no longer legally able to hold these bonds results in an irrational price dislocation that can result in outsized gains with very limited risk. I will also be monitoring and tightening stops as various items begin to run away.
In other news, my synthetic short in TSLA at the 260 strike has finally moved into the money. I’m looking at a price target of 100, or a 16,000 gain.
Devour your prey raptors!