Option trades and expiration: NYX, PCU, KFT, ADM & more!
This week was March options expiration and, as usual, I had a number of options positions expiring:
- Air Products & Chemicals [[APD]] – Some March 35-strike puts I sold against APD last November expired out-of-the-money (OTM) for a 5-month net return of 12.9%.*
- Archer Daniels Midland [[ADM]] – The March 15-strike puts I sold against ADM last September expired OTM for a 6-month net return of 5.9%.*
- Ingersoll Rand [[IR]] – The March 15-strike puts I sold against IR last October expired in-the-money (ITM) and I was put the stock for a net cost basis of about $13.10 per share.
- NYSE Euronext [[NYX]] – Some March 15-strike puts I sold against NYX last month expired OTM for a 7-week net return of 6%.*
- Southern Copper [[PCU]] – The March 17.5-strike covered calls I sold against my long position in PCU last November expired OTM for a 4-month net return of about 10%.
I’ve also recently initiated the following new positions:
Cal-Maine Foods [[CALM]] – I sold some April 20-strike puts against CALM after it and the general market showed signs of a rebound:
I wouldn’t mind starting a long position below $20 in this producer and distributor of shell eggs as a way of diversifying my dividend stock portfolio. The stock currently yields 6.7%, although as with other commodity based companies – like shippers, miners and royalty trusts – earnings (and thus dividends paid) can fluctuate over time. As with the market, the current short-term uptrend is due for a pullback, but at the same time appears likely to have further to go.
Emerson Electric [[EMR]] – I sold some April 25-strike puts against EMR on weakness after its recent up move:
I wouldn’t mind owning shares of this industrial equipment and services provider at below $25. It has a long history of growing its dividend (the stock currently yields almost 5%) and the stock appears undervalued here. Near-term price action appears unclear, but the technical picture is suggesting the potential for an intermediate-term or longer bottom being formed.
Genuine Parts Co. [[GPC]] – I sold some May 25-strike puts against GPC on weakness after its recent up move:
GPC is another stock I wouldn’t mind owning below $25. This automotive parts distributor has a long history of growing its dividend (the stock currently yields 5.7%) and the stock appears undervalued here. Near-term price action appears unclear, and a move into the low $20s wouldn’t be surprising (nor would a move immediately higher). But at the same time the technical picture is suggesting the potential for an intermediate-term or longer bottom being formed.
Kraft Foods [[KFT]] – Now for something a little different: I did a buy-write on KFT – I bought the stock at a little over $22 per share and sold some June 22.5-strike covered calls against the long position:
Shares of this packaged food products company seem reasonably valued here while the technical picture suggests further downside risk. The company has a history of raising its dividend, which, at current prices, yields over 5%. Buying the stock now means I’m eligible for the current dividend payment (ex-dividend date is 3/23), while selling the covered calls reduces my risk in the position given a likely retest of its recent lows.
NYSE Euronext [[NYX]] – I sold some April 17.5-strike puts against NYX after the March puts I’d previously sold against it expired worthless (see above):
The shares of this stock market exchange appear undervalued here, and are presenting intermediate-term positive divergences on the price oscillators I follow. The stock currently yields over 6%, and the company has indicated some commitment to the dividend, although it doesn’t yet have a real history in this regard. All in all, I wouldn’t mind being put the shares at current levels or lower, given what appears to be a good long-term total return potential.
Polaris Industries [[PII]] – I sold some April 17.5-strike puts against PII on weakness after its recent up move::
The shares of this maker of recreational vehicles appear undervalued at current levels (about $20 and yielding almost 8%) based on conservative estimates. The company has a good history of paying a dividend and so far appears to have the earnings and cash flow to be able to maintain it. As with the rest of the market, the technical picture suggests some consolidation following the recent run-up is likely. I wouldn’t mind being put the shares at slightly lower levels, given what appears to be a good long-term total return potential.
* As always, the return on “cash secured” put sales was based on the premium received from the sale of the options (minus commissions) against the unmargined capital set aside to pay for their possible assignment (i.e., my being put the shares of the stock).
