8 Dividend Stocks For Seniors, Options Trading, Options Premiums Income
Seniors need dividend and options premiums income now more than capital gains. Speculative trading losses sometimes take years to make up. Aging traders can't wait years for bull markets.
By Donald E. L. Johnson
Cautious Speculator
Nobody can predict markets or interest rates, but the assumption is that we’re in a bear market that will last awhile as the Fed raises the Federal Funds rate.
Seniors need income now.
8 big cap dividend stocks that yield an average of 5.4% on dividends belong on seniors stock watchlists.
Possible covered calls and cash secured puts trades that can enhance aging investors’ dividend income are shown in spreadsheets below.
The bear market continues. In a few weeks the Fed will hike interest rates another quarter or half point in its continuing battle against inflation. Core inflation (CPI less energy and food prices) still is high. Once per worker labor costs are hiked, they don’t come down, ever.
Last week, the president of a regional Federal Reserve Bank quipped that the bond markets are optimistically fighting the Fed. Bond markets always lose fights with the Fed, he said. Historically, bond markets are saying the Fed will continue to slow rate hikes, but history doesn’t say much about our current economic challenges.
That inflation will be tough to cool off leaves seniors seeking higher incomes from money markets, bonds, dividend stocks and options trades for the rest of their lives.
Their trading time horizons are counted in years, not decades. Good monthly income checks are critical if they are to maintain their lifestyles while preserving capital.
In a bear market that could correct after a recent rally at any time, traders can sell cash secured puts on stock with bullish momentum and bullish price objectives instead of buying stocks and writing covered calls. This watchlist, which includes some of my current positions as well as stocks I recently sold, is designed to show the kind of returns a trader can get on bullish stocks in a bear market.
The puts watchlist is for about a $150,000 portfolio. This is because to put the same amount of money into each trade, some lower priced stocks have to be traded in more than one-contract trades. A trader could buy 100 shares of each stock and sell one option per stock or cherry pick the list to make their portfolios fit available trading funds.
The covered calls watchlist is for about a $225,000 portfolio, assuming a trader has other kinds of stock in other buckets. It is meant to be used when and if the stocks and markets dip another 5%, 10% or 20% if some of the positions aren’t opened immediately. Read my posts on trading covered calls to learn how to do these trades. You don’t have to be a numbers nerd or trading whiz to do covered calls or puts trades.
These are the 20 stocks that wound up in the watchlist that I created in my search for bullish dividend payers. The puts watchlist stocks are bullish. See the notes below this spreadsheet for more information about which stocks have bullish momentum and point and figure price objectives. I own or have options in D, DOW, DUK, DVN, KMI, NEM and XLE.
Many traders will prefer to wait for a correction before buying the stocks and start collecting dividends. They don’t sell puts and calls.
Others will buy the stocks now and write covered calls that will give them dividends of 5.4% and immediate options premiums that will give them annualized returns on risk (AROR) of from10% to 30%, depending on the trades they do. Click on the home page link below to see articles on selling puts in bear markets, on selling covered calls and on trading the wheel.
Note the “Ern” for earnings report date in column A of the spreadsheet. A lot of options traders don’t like to have open positions in options on an underlying stock on the day it reports earnings and offers new guidance. But speculators trade vertical spreads and naked calls and puts in anticipation of the earnings reports, hoping for “surprises” that reward their risk taking.
Earnings Reports
I’m waiting for this week’s scheduled earnings reports from these stocks that I want to own or own and on which I trade covered calls and puts: AA and KMI, which report Wednesday.
Next week we’ll get earnings reports and new guidance from: ABT, CAT, DOW, FCX, JNJ, LMT, LYB, MMM, T and VRTX. I will try to not have options positions in those stocks on the days that they report earnings. If a company surprises with good or bad results or guidance, I’ll wait three days before I open new options trades or buy a stock.
My trades
On Jan. 13 my expiring calls options included: AA, CSCO, DVN and PFE. Expiring puts: CAT, DVN, MRK, NEM, PFE and XLE. I took assignment on PFE $48.50 puts and may write calls on them this week or after the company reports its earnings on Jan. 31.
LINKs:
Home Page. See previous articles on other trades, stocks and watch lists. If you read several of these articles, you’ll learn how my strategy is meant to work. No guarantees. Links to useful web sites are on the lower right corner of the home page. Scroll down.
Follow @realDonJohnson on twitter.com.
Selling in The Money Covered Calls Can Yield Big Annual Returns on Risk. By Donald E. L. Johnson
20 Ideas for Adjusting Your Stock and Bond Portfolio, by Christina Lourosa-Ricardo.
How to Beat Inflation Tax, Bear Market Tax With Dividend Stocks, Covered Calls, Cash Secured Puts, by Donald E. L. Johnson.
Wars Breed Inflation, Rising Interest Rates, Market Turmoil, By Donald E. L. Johnson.
Ways to use StockRover.com to analyze stocks
Calls vs Puts Options: What’s the Difference?
A video on how to place options trades on Think or Swim.