I’m reporting an options trade that executed on Monday. Last Friday, I set a limit order on shares of KO to sell a put since my previous put was expiring. KO currently yields 2.9% but they are expected to raise the dividend for the first payment next year in April. They have raised their dividend each year for over 50 years! If they raise the dividend as much as this year, .025, then my YOC if assigned will be 3.4%. Not bad for a dividend champion of this caliber.
The trade:
I Sold 1 KO Feb 22 ’14 $38 Put @ 1.67
This trade could turn out a few ways:
1) I hold shares until expiration and shares are trading above $38.00. I will get to keep the $167 in options premiums.
2) KO is trading below $38.00 at or before expiration and shares are assigned. I will receive 100 shares of KO at a cost of $36.33/share. This is a discount of 6.3% to where the stock is currently trading and 8.3% below my cost basis of $39.62/share.
3) Shares of KO go on a run and I decide to buy back the put early for a profit less than $167.
I currently have 14 open options positions and a total options profit of $3486 for 2013. My options page has been updated accordingly.
Great post aai. I had to also fill out extra forms with scottrade to handle options with my account. As long as strategies stay simple options can be effective tools for extra income.
Hi IE,
Thanks, I wanted to give a better idea of my thought process when selling puts. I agree with you and I’m really just sticking to the basics, selling puts against companies I’d like to own more of anyways.
Thanks for stopping by!
I increased my position(sans options) yesterday. I look forward to your other article on reading about stock puts to learn the nuts and bolts of this option. Keep it up! — wallet engineer #1
Wallet,
Nice buy! I’m increasing my position with market purchases in combination with selling puts to maximize profits. I just posted an options introduction mainly describing selling puts. I hope you like it.
Take care!