Monday, January 17, 2022

In anticipation of Tuesday Market in Nucor

Underlying symbol:  NUE

 
I am doing some prep for tomorrow's market.  If I were just buying or selling stocks, I could enter a buy or sell on open.  I could place a limit order or a stop on a position.  But options are different.  Option prices change dramatically based on what is going on with the underlying stock but also based on emotion.  I could put in a "sell to open" or a "buy to close" order on any given option, but I have no premarket activity to help me pick a price.

What I do is evaluate a few possible options.

The stock I am interested in is Nucor symbol NUE:

I own quite a bit of Nucor.  The yield is less than I would like and therefore, I use options to make this holding a good income investment.  

A few fundamentals to consider:

    EPS = $16.87
    ANNUAL DIVIDEND = $2.00
    INCOME = Y.O.Y down but most recent Quarter Up
    D/E ratio = .37

I call this a fundamentally sound company.  

My basis on the shares I would sell the call on is $106.   You can use the call calculator to determine how your basis affects the results; or use it to decide if you want to add at about $111.

Here are two options I am considering for tomorrow.  Since NUE was ex-div on Dec. 30, I am not going to capture the next dividend if either of these calls is exercised.   If NUE delivered a 5% yield, capturing the dividend would be of importance.  These options listed below do not include receiving the next dividend.




















This is an unusual expiration as it is a weekly expiration.  I use Schwab and could not find a Quarterly expiration for March.  Also open interest is very low.  We will just have to see if this call is available on Tuesday.  But all in all, I like the return.

The next call is more typical.  It carries a February expiration and has a lot of open interest.  With a lot of open interest, it is easier to find a buyer for my call.




















We will just have to wait and see what happens tomorrow.  But either way I like adding more than 2% yield on the call premium alone as I continue to build a position in Nucor.

MM

Long NUE with calls on some of my position














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