5 November 2O23 Cash Secured Puts Options Trades

Small and large dividend stock and ETF investors can use covered calls and puts trades to generate monthly income from options premiums and options trading.

By Donald E. L. Johnson

Cautious Speculator

• The first five November puts trades average returns are about 14.38%

• Returns on 19 October trades are averaging about 11.722%

• Most of the trades are on higher yielding dividend stocks that are volatile enough to produce good options premiums income.

• That the stocks are mostly bearish makes them more risky and potential long-term winners.

The five initial November 2023 cash secured puts options trades are generating about 14.38% in annual returns on risk. This assumes the trades will be replicated in the next 12 months by similar trades and results. The five stocks’ average dividends yield about 2.5% annually.

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The stocks include Bunge Ltd. (BG), Intuitive Surgical Inc. (ISRG), Kraft Heinz Co. (KHC), Mp Materials Co. (MP) and J.M. Smucker Co. (SJM). I own all of these stocks but MP, which is a small speculative trade. If the puts are assigned, I will buy the stocks at an average discount, or margin of safety, of about 9.674%. I also sell covered calls on the four stocks that I own.

In these markets, I’m selling puts on stocks that are mostly in down trends. The idea is to buy low and sell high if the stocks rally in the next few months or years. In the meantime, most of them are volatile enough to produce good options premiums income by selling covered calls on them. Because the stocks are in down trends, they are more likely to be assigned at the strike prices and some may produce initial losses along with dividend and options premium income.

Over time, most losses can be over come by collecting dividends and covered calls options premiums. And in a few months, dividend stocks may rally if the Fed and Congress get spending and inflation under control.

That is, instead of cutting my losses short by selling losers, I keep selling covered calls on them and collecting their dividends. Eventually, the net debits will be less than the current stock prices and even the original purchase prices as I recently explained.

But wars like those in Ukraine and Israel can be inflationary around the world. No one can predict prices. All we can do is trade and manage our risks, which may become higher before they subside. We all have to trade within our tolerance for risks.

My strategy is to trade for dividend and options premiums income and to manage my risks as best I can. In addition to bottom fishing, trading for options premiums and dividend income, holding cash is a reasonable way to hedge against sinking markets. I do some of that, too.

My open October puts trades will expire during the next two weeks. Then I’ll roll most of the trades that expire worthless into November puts trades. If any of the October puts trades are assigned, I’ll either sell covered calls on them, sell the stocks or hold them until they rally and I can get better covered calls options premium prices on them.

The 19 October puts trades on 14 stocks are yielding options premiums that produce average returns on risk of about 11.722%. The stocks dividend yields average about 3.288%.

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Beware. Like all investing, trading stocks and options is risky. I’m an active private speculator who trades covered calls and sells puts on stocks for my accounts. I am not a professional analyst nor a financial advisor. I don't take and won't take responsibility for how other people trade. This article is for educational purposes only. It is not advice. The data presented looked accurate at publication time except for intra-day fluctuations, but I can’t guarantee the accuracy. Traders should do their due diligence. I reserve the right to trade any of the listed stocks and options at any time. I receive no compensation for producing this content nor for any links.