I haven't looked at financials lately, as they were all pretty expensive. I am happy with our CM position in the LTP as it's a nice dividend-payer (4.6%) and not too expensive (p/e less than 10). They are not far off the mark we entered at on 4/7 ($74.50).
As a new trade, I'd buy the stock for $76.85 and sell the Dec $75 calls for $3.65 and the $75 puts for $3.45 for a net $69.45/72.38 entry. Doesn't sound sexy but $5.55 is 8% if called away in 6 months plus $1.77 (total) in June (25th) and Sept dividends brings it up to 10.5% back in 6 months.
Of course the way I look at these is keep driving the 20% annual returns through repeat sales and dividend collections and you're 5 years away from a free position that just pays you dividends forever more.
Let's say you initiate one of these positions for $20,000 every year:
- Year one $20,000 invested, $4,000 back = $16,000
- Year two +$20,000, $8,000 back = net $28,0000 invested
- Year 3 + $20,000, $12,000 back = net $36,000 invested
- Year 4 + $20,000, $16,000 back = net $40,000 invested
- Year 5 + $20,000, $20,000 back = net $40,000 invested.
You can stop the cycle in year 5 and leave your $40,000 at work and collect $20,000 through dividends and further option sales. This is very conservative as you are diversifying 5 positions over 5 years so not too much chance of getting burned with a sell off but, if you do - there's your next $20,000 put to work!
So PLEASE do not tell me you can't see how you can ever retire when you can accomplish this by putting $20,000 a year to work for 5 years (4 really, the last year is free!).
