Wednesday, November 30, 2016

RGCO good news

RGCO is a 2014 Dividend Machine and this is good news for this greater than 3.5% dividend stock.  M*
RGC Resources declares $0.2175 dividend http://seekingalpha.com/currents/post/3227186?source=ansh-d $RGCO

Monday, November 21, 2016

More money on LLY calls

I had to make this trade today.  I am way behind on covered call income and when you find a stock that has been in business for a long time and pays a solid dividend, your risk is immediately reduced.  Someone thinks Lilly, symbol LLY, which I bought at $76.32 is going to improve to  $82.50 by February 17, 2017.   They are so sure, they paid me $3.94 for the option to buy.   Plus, I should get the February dividend.

Here is the table:



M* MoneyMadam

Disclosure:  Long LLY with calls

CVX fair value $130 in three years

If you believe in fair value analysis this is a very good read on Chevron.M*

Chevron's Dividend Growth Coming Back? http://seekingalpha.com/article/4024962?source=ansh-d $CVX

WPZ good news

Good news for a change. M*

Williams Partners: Distribution Is Getting Safer http://seekingalpha.com/article/4025056?source=ansh-d $WPZ

Tuesday, November 15, 2016

CSCO call completes the 2016 expectation

In September I added CSCO to the 2016 Dividend Portfolio at a basis of $31.40.  I added 200 shares with the intent to sell a call on one half of the position.   I have been waiting patiently and today I sold a February $34 call for a premium of $.42.  The expiration date is well after the next expected ex-dividend date of 1/2/2017 and therefore, we should bank both the premium and the dividend.  See the table below.





M* MoneyMadam
Disclosure:  Long CSCO with calls

2016 Portfolio

Monday, November 14, 2016

CMI $130 December Call

Cummins Inc, symbol CMI,  a subject of many posts. on this income investing blog is the subject again.

CMI belongs to the 2016 Dividend Portfolio.  We have a Dec. $130 call working. Today, CMI traded as high as $138.77 but closed at $134.74.   With our $130 call working, I would not be surprised if we lost CMI.  But the call buyer has not yet executed the option although they are in the money.

What will happen?

Our basis is $118.50.  We banked a call premium of $1.75. Lucky for us (or is it good planning) CMI is ex-dividend on 11/17/2016 so they have to take our shares before 11/17 or we get the dividend of $1.025.

With the controversial news (see link) perhaps the call buyer will not execute the option out of fear that the price will fall further.  Here are our options:

Should the owner of this call execute the right to buy our shares before the ex-dividend date 11/17, our gain is.



Should the call buyer execute their option after the ex-dividend date  11/17 at $130 our gain is.



We have only two outcomes.  We own the stock at the end of the expiration date or we do not. If we still own it, we know what we have but if we lost it what is our loss?

Lost Opportunity

Lost opportunity means we are losing out on potential future price appreciation.  The option buyer is already in the money.   Some will argue that CMI is on a roll and will continue to be on a roll.  They argue this dip is an opportunity to buy.   Selling a call on your shares at $130 was silly.  Even on the dip, CMI  is $134.  You would be better off to hold the share through thick and thin.  I argue that we all can win.

December Expiration

We still have until December 16.  We cannot sell our shares before then as we are under contract.  Maybe the stock price continues to decline . We are under contract, we have to keep it until the call expires which means the stock price could go to zero.  That is a silly thought.

How likely is it that CMI will drop below our basis of $118.50 is a serious thought.  I think that scenario is highly unlikely but it is possible.  On the other hand, CMI could rebound and be well above $130 when the call expires the call buyer takes our shares but we all win  Just look at the tables above.


If CMI is $129 when the call expires, we will mostly likely retain our shares and have another chance to sell another call at a wonderful premium.  Select your call wisely and you will get the dividend too.

Next Steps


I am looking to add to CMI and sell a call.  Today I could add CMI at $134 and sell a January $145 for $1.45.  If I buy before 11/17,  I will get that dividend as well.




I even looked at a March Call.  We would get two dividends plus the call premium.



But you must realize the risk of being in contract and unable to sell if your stock dives.  You must understand if you buy such a good stock that you can get increasing strike prices and increasing call premiums, that you will lose it to the call buyer; lost opportunity.

I like these options.




Good Income Investing.

M* Money Madam

Disclosure:  Long CMI with calls