Selling Options for Fun & Profit

Selling Options for Fun & Profit

As I mentioned way back in January,  I had the intention of merging the DDI #1 portfolio (moving it from WellsTrade) with my existing Fidelity account to generate both daily dividends as well as option income. After months of sort of moving things around and getting re-focused on creating systems for generating income, I’ve got the Fidelity account dialed in for primarily option trades as a source of income – so that’s what I’m doing there, covered calls, put spreads and even some *naked* puts – eeegads!  Yeah, naked puts, I will write them when I’m ok with buying the stock at a lower price, knowing that even if the price drops below the strike price, many times you can roll the contract out a few months to collect a few extra dollars of income *AND* if the stock turns around, I won’t even have to buy it! Some times you get lucky and that all works out…sometimes not…but that’s what trading is all about, playing the percentages.

Today I opened a new spread on a company I really like the fundamentals on – ticker: MKC – McCormick and Co., best known for their wide variety of cooking spices.

Screen Shot 2018-07-24 at 12.56.08 PMI like this company for a number of reasons, one- it’s got a HUGE moat, and barrier to entry in this business will continue to give this 129 year old company  a pretty strong grip on this market sector, keeping most new comers out.

Second, the company is consistent buyer of it’s own stock – shares outstanding has dropped from 133M in 2013 to 128M in 2017.

Screen Shot 2018-07-24 at 1.02.43 PM

And the third reason (although there are many others I won’t go into here) why I like this company, is it’s ever increasing dividend payout…. from $.98/share in 2009 more than doubling to $2.08/share today.

Screen Shot 2018-07-24 at 1.07.04 PM.png

The down trend support is at about $100/share and it’s currently trading at about 20% premium to that level. With that in mind, I went ahead and opened a December 2018 PUT Spread – selling the $100 PUT and buying the $95 PUT taking in about $380 in premium.

I’d love to hear what you are buying or trading? Adding dividend stocks to your portfolio? Or do you prefer to trade the options market? Leave a comment below with what’s working for you!

Thanks for reading!

 

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