Friday, February 7, 2020

Is Watsco worth a quick trade?

Watsco, symbol WSO, is a bit soft today.  I am adding today because I need to put some capital to work.  Two IBM and two INTC calls were assigned yesterday and today which created some cash that I need to put to work.

What are my choices?  I could buy a 3 month CD or put it in Schwab's money market and get something like 1.5%.   I prefer to take some risk on this stock in exchange for a quick 2.17% yield from selling a call with an expiration date just 15 days out.  I am selecting a strike price that is close to my basis and I expect to be called away.   If these shares are called away in 15 days, my total return will be 3.38% in just 15 days.

Stock Price on Open Call Expiration 
WSO $172.95 2/21/2020
Cost Basis:   2/7/2020 $172.90
Strike Price: $175.00
Call Premium:  $3.75
Dividend  Ex-div after exp. $0.000
Call Yield on Basis 2.17%
Call + Dividend Yield on Basis 2.17%
$ Gain if Assigned $5.85
Max Return  if Assigned 3.38%

Let's say the market and WSO continues on a weak run and I am stuck with more shares of WSO.  That is okay by me.  WSO pays a very nice dividend and likes to raise the dividend.   Take a look at the fundamentals.

WSO Earnings Dividend
 Earnings > Dividend $6.42 $6.40
 Debt to Equity 0.27
 Dividend Yield 3.70%
 3 Yr. Rev. Growth 3.33%

Good income investing.   Use the interactive tool below to enter your basis, strike price, premium and if appropriate quarterly dividend to determine if the call available works for you.

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

M* MoneyMadam
Disclosure:  Long WSO with calls