Monday, March 21, 2022

Short Duration Call: My favorite call today NUE 14% in 12 days

Underlying Security Symbol: NUE

 

Nucor has been a true money machine for me.  I am always nervous about a stock trading at its 52 week high but then again, when that stock carries a P/E under 6 I am more comfortable.

In order to calm my nerves about buying high, which I did today, is to sell a call with a quick expiration date.  I could have selected a May 20 expiration and received $4.05.  But that expiration carries more risk because it is longer.  Instead, I chose a $160 call that expires on April 1, 2022.  I received a premium of $3.70.  Moreover, depending on how savvy the call buyer is, I should also receive the $.50 dividend as NUE goes ex-dividend on March 30.  

In 12 days, if NUE continues on its upward trajectory, I would realize a return of more than 14%.  If I end up keeping this lot of NUE, I get a stock with a dividend yield of 1.39%; an immediate cash deposit of $3.70 or 2.59%: 



 

 

 

 

 

 

 

 

 

 

If this lot is not assigned I will have more opportunities to sell calls.  

Revenues are growing as is income, although income growth has slowed lately.  D/E ratio of .35 suggests NUE is a safe company. The risk of course is changes in tariff policies which have benefited U.S. steel producers.  It's a volatile time out there in the world and this justifies a short duration call.  

 

My hope is to get assigned on the expiration date.   

MM MoneyMadam

Data from Schwab.com and Marketxls

1 comment:

MM MoneyMadam said...

This lot was assigned. MM