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Thursday, March 28, 2024

Top Trades for Wed, 09 Jun 2021 11:42 – AIV

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Top Trades for Wed, 09 Jun 2021 11:42 – AIV
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AIV is a nice little Apartment Management company that split off AIR (the actual apartments) from their REIT so they are just focused on managing and refurbishing apartments now.  I don't think AIV was getting any credit at $1.1Bn in market cap – even after they've run up to $7.50.

This is the same good management they had before – they are just splitting the business, which I think we're getting for free against the asset value ($8/share) of the company.  It's a long-term growth thing but they don't have long-term options though the ones they do have are actively traded so, in the Dividend (which they don't pay yet) Portfolio, let's:

  • Buy 2,000 shares of AIV for $7.61 ($15,220) 
  • Sell 20 AIV Dec $7.50 puts for $1 ($2,000) 
  • Sell 20 AIV Dec $7.50 calls for $1.10 ($2,200) 

That gives us a net entry of $11,020 or $5.51 per share and, if assigned 2,000 more at $7.50, we're average $6.50, which is a nice discount to the current price (and then we'd sell more calls to drop to $5.50).  AIV does not yet pay a dividend (no profits) but, if we get called away at $7.50, that's a $3,980 (36% profit in 6 months) or, if we end up owning $22,000 worth (4,000 shares) at $5.50, just selling 10 calls for $1,000 is the same as getting a 5% dividend – and that's what we'd be getting every 6 months.