covered put

Read The T leaves

Over a long period of time companies that pay dividends and investors that use those dividends to buy additional shares have done well.  It is for this reason that we are looking at AT-T.  The stock has pulled back from the low 30’s to the $28.50 range. The dividend yield is roughly 7.25% based on the current price. (keep in mind that dividends are NOT guaranteed).  The company has a fair amount of debt but we believe this dividend will stay above the 5.50% during the year.

You may be asking that is lower then the current dividend. That would be a good observation. This happens when the price goes up and thus the dividend yield would go down. So that being said, look to sell the January 4, 28 puts. This gives you a little room as well as if the stock is put to you, we would look to sell covered calls out of the money during the year.

The dividend paying stocks give up some downside protection, as in the dividend will lower our cost basis as we receive the cash. If you chose to reinvest you’ll increase your overall investment and if the stock has pulled back some more you’ll increase the yield on your new shares.

As always consult your financial advisor before investing of any kind. Investing in stock and options requires risk and IS NOT SUITABLE for all investors. You have a variety of issues to consider before making any investment. Our opinions give no warranties or guarantees of specific performance, invest at your own risk.

As we trade this Friday morning 1/4/19 T is trading at 30.16 per share. 

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