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Posts Tagged ‘covered call trades’

HFC pays 8th Special Dividend and Boosts Regular Dividend by 50%

Investors looking for a regular helping of special dividends should consider HollyFrontier Corporation (NYSE: HFC). The company just announced its 8th special dividend since August 2011.  In addition, HFC just juiced its regular dividend by 50%.

Subscribers to my Get Rich Monthly Income Plan received $31.00 per share in dividends in 2012 with a yield on cost of 12.5% in one year.  In addition, subscribers received $1,690 in call premiums on each 100 shares of HFC stock in 2012.  The covered call premiums accounts for a yield of 68% as subscribers utilized a special income technique called the perpetual covered call.  In total, Monthly income Plan subscribers booked a total return of 219% on HFC in 2012 alone!

HollyFrontier Corporation (HFC) announced today that its Board of Directors approved a 50% increase in the Company’s regular quarterly cash dividend to $0.30 per share from the current rate of $0.20 per share. This is the fifth increase in the regular dividend since the merger in July of 2011, representing a total increase of 300%. The regular dividend will be paid on April 2, 2013 to holders of record of common stock on March 15, 2013.

The Company also announced today a special cash dividend in the amount of $0.50 per share. The special dividend will be paid on March 19, 2013 to holders of record of common stock on March 5, 2013. This is the 8th special dividend declared by HollyFrontier since August 2011.

HFC’s stock price is up 70% in the past year but still trades at a low PE of 7.5 which is a 60% discount to the industry average PE ratio.  HFC has an equity summary score of 9.8 out of 10 for a VERY Bullish outlook.

Mike Jennings, CEO and President of HollyFrontier, said, “Our Board of Directors remains committed to delivering value to our shareholders through both a growing regular dividend as well as special dividends. After today’s 50% dividend increase, our current regular dividend yield is 2.2%, and our trailing twelve month cash dividend yield stands at 6.1% relative to today’s closing price of $53.72. Including today’s announcement, HollyFrontier has returned almost $1.3 billion in capital to shareholders through regular dividends, special dividends and buybacks since the July 2011 merger.”

Perpetual Covered Call Year End Results

For the year 2012, we had some impressive investment returns.  The Monthly Income Perpetual Covered Call Portfolio easily surpassed both the S&P 500 and PowerShares S&P 500 BuyWrite Portfolio (PBP).  The table below displays the investment returns for each of the Perpetual Covered Call positions.  The average monthly return was 6.2%!  We had exceptional returns on HFC, CVS and JCI (see table).

Get Rich Investments - Perpetual Covered Call Trades

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In January, we kicked off the perpetual covered call strategy. We have started adding new perpetual covered call trades each month to keep the trades fresh with market conditions and opportunities.  For those who are new to this concept, let me share the rationale of this income investment. This strategy was created to produce monthly income with stock dividends and covered call premium.  In addition, there is a protective, blanket put, to ensure the volatility in the market does not affect your return of capital.

A New IPO – Gold Stocks with a 7% Dividend Yield

If you are looking for income and have an interest in gold as an investment, then a new IPO might be what you are looking for to combine the two needs.  Faircourt Gold Income Corp. (FRCGF) is a new closed-end fund that invests in gold stocks and sells covered calls and puts for income.  With the current market flux, gold is a good play until we get more definite information where the fiscal policy and taxes end under the new negotiations.  Why not let professional managers sell covered calls and pay you monthly dividends.  Here are the details.

Faircourt Gold Income Corp., a closed-end investment fund established as a mutual fund corporation under the laws of the Province of Ontario, is offering upon the terms and subject to the conditions specified in this short form prospectus, to issue up to 4,733,740 Class A shares of the Company at a price per Offered Share of $8.45.  The initial IPO was November 9, 2012.

The shares are currently trading at $8.24, a 2.5% discount to the IPO price.  Faircourt Gold Income pays monthly distributions with an annual yield of 7.0%.

 

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The Company will not make any investment that would result in holdings of gold companies comprising less than 60% of the NAV of the Portfolio of the Company at the time of such investment. The Company will not make any investments that would result in holdings of gold bullion comprising greater than 30% of the NAV of the Portfolio of the Company at the time of such investment.

In order to generate additional returns and to reduce risk, the Company has engaged the Manager to employ an option strategy whereby it writes covered call options on securities held in the Portfolio and cash secured put options on securities desired to be held in the Portfolio. It is the Manager’s belief that utilizing the option strategy will assist in providing Shareholders with lower volatility and potentially enhanced returns as compared to owning the individual securities in the Portfolio directly.

The Manager believes that option writing has potential to add value in some sectors more than others. Option writing programs in the past have relied on the volatility of a security as a source of long term capital gains distributions. All other things being equal, sustained volatility in the price of a security results in higher option premiums in respect of such security. The Manager believes gold stocks, which have historically maintained a high degree of volatility, are well suited for a covered call writing strategy. This higher degree of volatility is reflected in the S&P/TSX Global Gold Index which has an historic 10 year average volatility is 36% as measured by standard deviation, between September 2002 and September 2012, while the S&P/TSX Composite Index has exhibited a volatility of 16% during the same period.

Covered call options and cash secured put options may be written from time to time in respect of part of the Portfolio.  The extent to which any of the individual securities in the Portfolio are subject to options and the terms of such options will vary from time to time based on the Manager’s assessment of the market.

How to Make Monthly Income in a Sideway Moving Market

Expectations for the third quarter earnings were dismal, with forecasts for a decline in profits from a year ago.  But a recent flurry of high-profile reports has investors scowling at the weak revenue numbers, adding to worries about the state of the U.S. economy and the outlook for corporate America.

IBM, General Electric and Microsoft fell short of revenue expectations, creating a sour mood early in the third-quarter reporting period.  This has led to a market that is moving nowhere too soon.  For the last month (Sept 24 – Oct 19), the benchmark S&P 500 Index is only up 0.4% while the PowerShares S&P 500 BuyWrite Portfolio (PBP) is down 0.95%.

Where can income investors go for monthly income in a sideway moving market?

One option is to look at a covered call strategy for monthly income.  A covered call strategy provides income from the premium received when a call option is sold against 100 shares of a stock.  In general, a covered call makes money when the stock price goes nowhere (like today’s market), when the stock price increases and provides downside protection when a stock slightly declines in price.

Subscribers to the Monthly Income Plan had exceptional returns from the monthly covered call trades.  We enter 4 monthly covered call trades on September 24 2012 for trades to expire on October 19 2012.  This is a total of 26 calendar days for these covered call trades.

The results included:

a 6.75% monthly return on the United Rentals, Inc. NYSE: URI covered call;

6.57% on the USG Corporation NYSE: USG covered call;

5.09% on the Royal Caribbean Cruises NYSE:RCL covered call;

and a 5.4% return on the SanDisk Corporation NASDAQ: SNDK covered call.

This is an average return of 5.95% in one month on these 4 covered call trades.  For comparison purposes, this is an annualized return of 83.6%.

These trades significantly beat the S&P 500 and PBP Buy-Write for the last month.  For income investors, they made $595 for every $10,000 invested in these 4 combined covered call trades.

Click here to subscribe to the Monthly Income Plan to get new covered call trades each month for only $19.95 per month.

 

September 2012 Monthly Income Plan Update

As we approach the end of the September option expiration cycle, the Get Rich Monthly Income Plan had a great month for investors.

In January, we kicked off the perpetual covered call strategy. For those who are new to this concept, let me share the rationale of this income investment. This strategy was created to produce monthly income with stock dividends and covered call premium. In addition, there is a protective, blanket put, to ensure the volatility in the market does not affect your return of capital.

We will be adding one new perpetual covered call each month to keep fresh ideas on the table. We will follow the progress of the perpetual covered calls each month the year. I will email premium members with trading directions when an action is required. Here are some of the results for 2012:

Perpetual Covered Call Returns:

Stock 1 – Oil Company has an YTD total return of 153% including dividends and special dividends.

Stock 2 – Drug Store Company with an YTD total return of 68.1% including dividends.

Stock 3 – Technology Company with an YTD total return of 27.3% including dividends.

Year to date, the SPY (S&P 500) is up 16.1% and the Powershares S&P 500 Buy-Write (PBP) is up 8.16%.

We also provide a list of stocks for monthly covered calls. Here we change the list each month based on investing in the right stock for monthly income. For the September option cycle, this was a great month for our Monthly covered call trades.

We made monthly returns of:

7.83% on GME,

6.91% on LAD,

3.8% on COH, and

3.4% on PSX,

We have added the covered put trades as an additional way to sell premium and to enter stock positions. I frequently sell puts to enter a new stock position because (1) I get the stock at a lower price than it is trading at the market. (2) I get to produce income from the premium I receive when selling the puts. If the stock is above the put strike price at expiration, I keep the premium and have the opportunity to sell more outs or just purchase the stock cheaper because I have the put premium to cover partial costs. I have used this technique for several months on the same stock before I get the stock put to me. This creates enough income to really lower the total cost of the stock. Then, when the stock is put to me, I sell calls (covered) to earn more income until the stock is called away. Then – rinse and repeat.

For investors wanting to create monthly income, the Get Rich Monthly Income Plan is right for you. Click here to learn more.

August 2012 Monthly Income Plan Update

As we approach the end of the August option expiration cycle, the Get Rich Monthly Income Plan had a great month for investors.

In January, we kicked off the perpetual covered call strategy. For those who are new to this concept, let me share the rationale of this income investment. This strategy was created to produce monthly income with stock dividends and covered call premium.  In addition, there is a protective, blanket put, to ensure the volatility in the market does not affect your return of capital.  We will follow the progress of the perpetual covered calls each month throughout 2012 and I will email premium members with trading directions when an action is required.  Here are some of the results for 2012:

Perpetual Covered Call Returns:

Stock 1 – Oil Company has a YTD total return of 96.1% including dividends and special dividends.

Stock 2 – Drug Store Company with a YTD total return of 36.4% including dividends.

Stock 3 – Technology Company with a YTD total return of 25% including dividends.

We also provide a list of stocks for monthly covered calls.  Here we change the list each month based on investing in the right stock for monthly income.  For the August option cycle, this was a great month for our Monthly covered call trades.  We made monthly returns of 7.55% on UA, 4.33% on LVS, 4.0% on HP, 3.73% on VIAB and 3.58% on CERN.

We have added the covered put trades as an additional way to sell premium and to enter stock positions.  I frequently sell puts to enter a new stock position because (1) I get the stock at a lower price than it is trading at the market. (2) I get to produce income from the premium I receive when selling the puts.  If the stock is above the put strike price at expiration, I keep the premium and have the opportunity to sell more outs or just purchase the stock cheaper because I have the put premium to cover partial costs.  I have used this technique for several months on the same stock before I get the stock put to me.  This creates enough income to really lower the total cost of the stock.  Then, when the stock is put to me, I sell calls (covered) to earn more income until the stock is called away.  Then – rinse and repeat.

For August options, the covered put trades were great this month as all recommendations were winners.  Returns ranged from 2.2% to 3.93% in one month.

For investors wanting to create monthly income, the Get Rich Monthly Income Plan is right for you.  Click here to learn more.

Covered Write on American Tower (AMT)

American Tower Corporation (AMT) is a holding company. It is a wireless and broadcast communications infrastructure company that owns, operates and develops  communications sites. Its primary business includes leasing antenna space on multi-tenant communications sites to wireless service providers and radio and  television broadcast companies. This business is its rental and management operations. The Company also offers tower-related services domestically,  including site acquisition, zoning and permitting services and structural analysis services, which primarily support its site leasing business and the addition of new tenants and equipment on its sites. On August 6, 2010, the Company’s, Transcend Infrastructure Limited, acquired Essar Telecom Infrastructure Private  Limited (ETIPL). On June 29, 2010, it acquired 113 towers from Telefonica Chile S.A. As of December 31, 2010, the Company acquired 475 towers from  Telefonica del Peru S.A.A.

This is a covered call trade for monthly income using AMT as the underlying stock.  AMT has a neutral equity score of 5.8 in a 10 point scalle by analyst covering the stock.

OPTION STRATEGY:

Look at the January 2012 59.65 covered call. For each 100 shares of American Tower Corp (AMT) stock you buy, sell one January 59.65 covered call option for a 57.19 (58.69 – 1.50) debit or better.  That’s potentially a 4.3% assigned return.

STOCK TECHNICALS:

The technicals for AMT are bullish with a weak upward trend.  The stock is under accumulation with support at 57.67.  S&P rates this stock 5 STARS (out of five) – strong buy.

RESEARCH NOTES:
S&P maintains strong buy opinion on shares of American Tower (AMT) .  AMT announced it plans to acquire roughly 2,500 towers from Telefonica’s (TEF) subsidiary inMexico, Pegasos PCS, for roughly $500M.  We view the planned deal as a positive as it roughly doubles AMT’s exposure to Mexico and these towers should benefit from the recent spectrum auctions and the launch of new technologies.  We believe this also demonstrates AMT’s desire to remain in a growth mode while also looking to achieve REIT status. We maintain our 12-month target price of $74, based on 24X our ’12 free cash flow estimate, a slight premium to peers.

 

Covered Call Trade Recommendation on Kohl’s Corp (KSS)

This is a covered call trade for monthly income on Kohl’s Corp (KSS) using stock and call option with optional protective put.

Covered Call Strategy: Look at the November 2011 50 covered call.  For each 100 shares of Kohl’s (KSS) stock you buy, sell one November 2011 50 covered call option for a $47.37 (50.17 – 2.80) debit or better.  This is potentially a 5.5% assigned return.

Blanket Put:  If you are looking for a blanket put for protection, look to buy the Apr 2012 50 Put for $5.90.  You will sell the Blanket Put when the covered call position is closed.
Stock Trend: The technicals for KSS are bullish with a possible trend reversal.  The stock is under accumulation with support at 47.72.  S&P rates this stock 4 STARS (out of five) – buy.

S&P research notes:

S&P sees September Retail Sales modestly better than expected.  Our sales weighted index of 13 retailers reported a September comp gain of 6.8% vs. our 5.4% estimate.  We see a cautious consumer with retailers offering both newness and value in their merchandise assortments successfully converting store traffic into sales. We think apparel remains a more promotional business than accessories, with exclusive brands a key comp driver for moderate-price retailers like KSS, which benefited from last month’s Jennifer Lopezand Marc Anthony launches. The company posted a 4% comp gain in September vs. our 1.5% estimate and August’s 2% decline.

Get more trades by subscribing to Get Rich Monthly Income Plan.

S&P Reiterates Strong Buy Opinion on Apple (AAPL)

S&P reiterates Strong Buy opinion on shares of Apple (AAPL) . AAPL announces the passing of Steve Jobs, its visionary and legendary co-founder and former CEO and Chairman. In August, he stepped down as CEO, concluding he could not sufficiently meet the rigors of the role, due to unfortunate health issues. One could argue that Jobs was the most celebrated innovator and businessperson of our time, and his loss to AAPL is immeasurable. Nonetheless, we think he created a company and culture that will continue to innovate and succeed, with countless executives and employees who will carry on. We think AAPL was largely prepared for this loss.

Apple closed yesterday at $377.37.  The November 2011 Call Option is selling for $13.55 at market close.

Get more trades at Get Rich Monthly Income Plan.

4 Stocks with AAA Ratings

Rating agencies — S&P, Moody’s and Fitch — analyze risk and give debt a “grade” that reflects the borrower’s ability to pay the underlying loans.  The safest bets are stamped AAA.  That’s where U.S. debt has stood for years. Moody’s first assigned the United States a AAA rating in 1917.  The country’s new S&P rating is AA+ — still strong, but not the highest.

There are currently four U.S. companies that have a better credit rating than their own country, according to Standard & Poor’s: Automatic Data Processing, Exxon Mobil, Johnson & Johnson, and Microsoft.

For Exxon, J&J and Microsoft, S&P reaffirmed their AAA ratings recently, saying that “given the global and diverse business lines and significant financial strength” of the companies, “we expect the borrower to continue to fulfill its financial obligations, even in a sovereign default scenario.” S&P said the same of ADP, even though most of its customers are U.S.-based.

Depending on your trust in the rating agencies, the four horsemen (JNJ, ADP, MSFT, & XOM) are financially strong and have the ability to cover their debt.  These four companies are non-financials so the U.S. debt downgrades will not affect their ability to cover debt.

Of course, the real kicker is that these stocks all pay a dividend and frequently raise their dividends each year.  These stocks may be long-term holding to sell calls on each monthly for monthly income while also collecting the dividend.  If they get called away, then pick a new entry point and sell cash-covered puts to buy the stock.  This is the rinse and repeat trading philosophy.

For more on this topic: CNNMoney

 

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