Thursday, August 16, 2018

Conoco Phillips symbol COP short term call

I did execute a trade on COP yesterday, Wednesday Aug 15.  I added to my position at $68.10 net.   I have mixed feelings about COP.

I am not really worried that the stock will go belly up.  Their balance sheet is solid.  My readers know I use debt to equity ratio as my first balance sheet screen.   COP carries is a D/E ratio of .45 which is solid.   But COP's dividend yield of just over 1.5% is less than I need.  On the other hand that dividend is growing which an income investor like me needs.  

I own quite a bit of COP and here is how I work it.  First I reinvest the dividend.  Next, I add to my position on weakness.  COP has a history of some volatility.


Then I sell short term calls to try to capture more than 5% in potential gain within 30 days.   These parameters are not set in stone.

A short term call to me is an expiration date 30 days out.  My typical long term call expirations go past the next ex-dividend date but not much more than 90 - 100 days.  I have done calls with expirations dates as short as 4 days.  That is more common on a stock that I think I can make money from the call but don't really want to establish a long term position in the stock because it is not a dividend payer or grower.  An example would be Twitter.  If you click on the 2018 covered call trades portfolio you will see the TWTR trade. 

COP is a quality stock and I can suffer through holding it should the price of my shares fall below the call strike price or even below my cost basis.

Here is the call I executed today on COP.

Notice that I will add just over 1% of yield on this stock.  So if I end up holding this lot, I will make the dividend of just over 1.5% and the premium from this call of 1.13% so now I am inching toward my desired income of 5% on my stocks.    With these short term calls, you can sell them over and over if you are lucky.

Now, if this lot of COP is called away, my max gain will be 7.59%.  I can live with that kind of return in just over a month.  This is how you work your portfolio.

M*  MoneyMadam
Disclosure:  Long COP with calls