Wednesday, May 29, 2019

Two calls in a down market while I nibble

One problem of selling calls on quality stocks is that when they are called away at your strike price, quite often their stock prices continues to go up and you lose that opportunity.

The other problem with selling calls on even quality stocks is that you are stuck with the stock until the expiration even if the stock price is sinking.

Our current market makes clear the second risk preempts the first.  Readers know I work my portfolio with calls.  Often times I am in and out of stocks once of two a year.  I am unafraid of each risk noted above because I try to pick quality stocks.   

I added a small amount of two quality stocks today and immediately sold calls on them.  One stock carries a low dividend yield but all other Dividend Machine fundamentals are in order.  The other stock carries a high dividend yield and has a little more debt than I like, but I believe it is a quality stock that will continue to pay their big yield.

I like to get a minimum of 10% total return; capital gain, call premium, and dividend; when I buy a few more shares and sell a call for no other reason than to reap income.  Here are my two trades today.

Microsoft, symbol MSFT

























Dividend fundamentals include earnings of $4.50 are greater than dividend of $1.84 and debt to equity ratio of .77.  Negative is low yield of  1.47%


IBM, symbol IBM


























Dividend fundamentals include earnings of $9.50 are greater than dividend of $6.48.  Debt to equity ratio is 3.03 and that is a negative but it is offset by a dividend yield of 5.01% with plenty of cash flow to pay it. 


Nibbling for income.   Disclosure:  Long MSFT and IBM with calls

M* MoneyMadam