Thursday, January 30, 2020

INTEL Tomorrow's call oppotunity INTC

* The call calculator in this post is on the fritz.  My apologies.  Please use the calculator in the call options page to see results of your individual trade.  Thank you for your patience.

I am a retiree and I can't live on a 1.2% U.S. treasury.  That lament is beginning to be a boring story.

Since my husband retired 20 years ago when a 7% U.S. treasury was common and since I retired 11 years ago when a 4% U.S. treasury was common, we are faced with a booming economy and no income from U.S. treasuries.  Will that change soon?  I think not.  Yet I know that everything will cost more twenty years from now.

My options are options.  Selling covered call options is the income play of this decade.  Until quality corporate bonds or U.S. Treasuries can deliver enough income to live on, we have no choice but to invest in dividend growth stocks with covered call oppotunities.

Tomorrow's consideration is Intel, INTC.

I like Intel because it has broken out and is growing.  Yet, it carries low debt and a low P/E/ ratio.

Let's look at call option potential using closing prices on 1/30/2020.

Stock Price on Open Call Expiration 
INTC $66.47 4/17/2020
Cost Basis:   close on 1/29/20 $66.50
Strike Price: $70.00
Call Premium:  $1.30
Dividend  2/6/2020 $0.330
Call Yield on Basis 1.95%
Call + Dividend Yield on Basis 2.45%
$ Gain if Assigned $5.13
Max Return  if Assigned 7.71%

I like this call because within 79 days which is less than 3 months, I can deposit a 1.955% yield on my principle.  Where else can you get that kind of income in fewer than 90 days?  

Your risk is with this trade is two fold.  INTC could tank for any number of reasons and you would be stuck with a stock worth less than you paid for it.  However, that risk is mitigated by the constant stream of income created by the dividend.   Perhaps the news is so bad that the dividend is reduced or even worse suspended.  The second risk is that you lose your shares to the call buyer.  You only gained 7.7% in less than 90 days but the stock soars and the buyer of your stock made more.  This is called loss of opportunity.  That risk is mitigated by the fact that you have pocketed the call premium and the dividend and the capital gain.  So put that money to work in your next covered call on a dividend stock.   Keep that up until U.S. treasuries pay you 7%.

The problem with blogging about covered calls is the dynamics of the trade.  The price of INTC and it's call derivatives will change constantly.   Use this interactive tool to determine if tomorrow's call activity is worth your attention.

Enter Cost Basis:
Enter Strike Price:
Enter Call Premium:
Enter Dividend if ex-div before Option Expiration:
Call Yield
Total Return Percent if Assigned

INTC is a quality stock that has been stuck in the mud for a while and now it is moving.  With a very reasonable P/E ratio and solid balance sheet, selling calls on INTC tomorrow may just be what you need to pad your checking account.

M* MoneyMadam

Disclosure:  Long INTC with calls