September Puts Options Trades Update #3

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

• September cash secured puts options premium income yields are averaging about 15% annualized.

• Three short-duration trades boosted the average returns on 18 trades.

• DG puts are likely to be assigned.

Cash secured puts options that I sold with September expiration dates are yielding options premium income that is about 15% annualized of prices of the 17 mostly dividend stocks and exchange traded funds when I did the trades.

Average annual yields on the 14 stocks and 3 ETFs would average about 2% if they all were assigned at the strike prices. Selling cash secured puts is a bullish trading strategy that I use in both bullish and correcting markets to generate options premium income. Some trades are bullish momentum plays and some are bottom fishing speculations.

The margin of safety on the 18 trades averages about 5.75% on trades that have and have had durations of between 4 and 28 days.

On Sept. 12, I sold puts on Accenture Plc. (ACN), General Dynamics Corp. (GD) and Microsoft Corp. (MSFT). A couple of days later I sold puts on the ETFS S&P Biotech SPDR (XBI) and S&P 500 Consumer Discretionary Sector SPDR (XLY).

GD jumped so quickly after I sold the puts that I bought them back for $0.46 a share. That cut the duration of the trade to 3 days from 17 and boosted the ARoR to about 32.5%. The same thing happened when I bought the Generac Holding Inc. puts back and shortened the trade duration to 4 days from 29. That boosted the ARoR to 44.5%.

The Devon Energy Corp. (DVN) seven-day trade and relatively high options price gave me a 52% ARoR.

Those three trades boosted my overall monthly returns nicely.

DollarGeneral Corp. (DG) was my speculative play of the month, and it’s not working so far. It looks like it will be the only puts trade that will be assigned this month.

The discount retailer reported disappointing earnings and tanked. Because it’s a good company that I think will recover, I sold DG 9.29.23 $25 strike puts for about a 3.6% margin of safety or discount. The premiums returned about 15% annualized and when the stock is assigned next week, my net debit will be $123.50 a share on a 100-share puts options contract. Today, DG closed at $115.15.

Morningstar.com’s fair value estimate on DG is $179. On Barchart.com, DG is rated a moderate hold with an average rating of 3.5 out of a possible 5. On Stockcharts.com, the bearish point and figure chart price objective is $84.96. I’ll take assignment on DG and sell covered calls on it until the net debit is near or above the market price of the stock.

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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.