Hedging Blue Chip Dividend Stocks

 |  Includes: F, GE, JNJ, NLY, XOM
by: Regarded Solutions

I read numerous articles on "safe havens", market "risks", and strategies to navigate the dangerous waters.

I have come to the conclusion that there are no "safe havens", no "ideal" strategies to navigate the muddy waters, and that no matter what we do, the markets abound with risk - some more than others, and some less than others.

We seek a balance, but where is that balance?

There are more "issues" out there than I have ever seen in my 40 years of personal investing, and I am weary of them all. Don't misunderstand, I am not giving up, yet, but I am still seeking Nirvana.

Ok, so what should we do?

I have personally found that owning blue chip, dividend paying shares in companies with great balance sheets and great management has given me an advantage during these times.

Stocks such as these: Johnson & Johnson (NYSE:JNJ), General Electric (NYSE:GE), Exxon Mobile (NYSE:XOM), Ford Preferred Class "A" F.PA., and Annaly Mortgage (NYSE:NLY). I hedge them by selling calls and buying puts, then deciding which option positions to close as they near expiration and then repeating the process. I should mention that there are no options available for the Ford Preferred shares.

What this has done is enabled me to maintain my positions, get out of positions with a little added extra if I choose, keep my dividend yield as well as getting a few extra dollars from the calls, and riding the puts if the stocks drop, with nearly paid for puts from the calls I have sold.

In effect, I have become a "small ball" trader - trading the options but keeping most of my core positions.

I keep one eye on the companies I own shares in, one eye on the overall market, one eye on Washington D.C., one eye on the rest of the world, and any remaining eyes on my sleep deprivation.

Disclosure: I am long XOM, GE, F.PA, NLY.