We will be watching for a new set up in T. T wants to buy Direct TV,this will cause a down ward motion of stock.But not much because dividend is already so high and stable.
Cash secured puts versus long term dividend growth stocks.
Double return of “Dividend Aristocrats”.
Similar risk for each plan, just double return!
Now that I have your attention.
There is nothing new under the sun they say.
In my past trading I have had good success with covered calls and credit spreads. The last 1.5 years with a crazy bull market not so much.
So in an effort to change gears I have heavily considered dividend growth investigating influenced by dividendmantra.com. Josh is driven to retire by 40,I am past that point but still willing to give it a good go.
I have been so inspired by Josh that I am starting my own blog,with a huge learning curve. dividendsandjadelizard.com
So rather than boring dividend stock and collecting average 4-5% a year,I thought there has to be a better way.
When I thought of selling LEAPs say Jan 2015 puts, ATM and wait, the math just made sense!
1. I will wait for next heavy down day in market and sell a group of cash secured puts on dividend aristocrats.
2. Use 1-4 contracts from watch list SYY,MO,T,KMI,CSCO,GE and HCP.
3. Collect approximately $4300.00/holding back $45300.00, return is 9.4% until Jan/15,except for HCP which is Oct 14. Use premium to purchase dividend stock like T for 5% plus during holing period and do a covered call on it.
4. Scenario #1 all expire worthless.
5. Scenario # 2 assigned on some.
6. Scenario #3 If assigned sell ITM covered call and start off with another set of Leaps. If assigned and stock has fallen below put strike,this would be same as if I owned stock and it dropped only collecting double the dividend!
7. I feel this is not a crazy plan nor am I alone in thought process as there is a large open interest of contracts on these LEAPs which could be institutional, but feel there is a method to others madness!
Disclosure: I have no positions in any stocks mentioned, but may initiate a short position in SYY, MO, T, KMI, CSCO, GE, HCP over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it. I have no business relationship with any company whose stock is mentioned in this article.