Happy New Year! I am back from my 2.5 year hiatus on SA. I have been buried in charts, textbooks, theories, graphs and the like. I am ready to amaze my followers with my first article of 2016. I thought I wouldn't have to as I was so close to winning the Power ball but I had to drive into work the next day like almost everyone else. Let's get down to business. I have been watching this short term blood letting in the past month or so, and licking my chops at some opportunities here. I am going to focus on 3 stocks and covered calls, but I want to impress upon the readers to keep it 3 months out on the call at the most. The only time I would go further in terms of expiration date is if half the position is short and half is longer and you are ok with the increased risk over the next 12 months. Take a look at my choices below:
1. TD Bank (NYSE:TD) ($34)-This bank has cash to debt of nearly 2:1, a PE of just under 12, as well as a 4% dividend. It is trading at the 52 week low. The April $35 calls are trading at $1.25 (3.7% premium). If you are called away at $35 in 3 months you net around 6.6%.
2. Ford (NYSE:F) ($11.95)-We all know this one, and it is beaten down. Trading at a 10 PE and a nearly 5% dividend I wouldn't mind holding this one so I recommend the April $13 calls at $.30. Take the 2.5% premium, and if the stock gets called away you earned 10% on your money. If the stock meanders around $12-$13 for awhile I have no problem clipping off 2% premiums and 1.25% dividend every quarter until it breaks out.
3. Marriott Intl (NYSE:MAR) ($59.55)-One of the industry leaders has seen its stock go from $78 to $59.55 in 3 months. Perfect! Position yourself below $60 and write the $62.50 strike price on April calls. Grab the 4% premium while you wait. If it runs back up to $62.50 and you are called away, enjoy the 9% return.
These are the 3 stocks I feel are conservative enough to hold onto over time, but offer a short term benefit if the market steadies upward. I refuse to be greedy, take your profits and live to fight another day. I am not going anywhere, there is more where these came from. Have a nice weekend.
Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.
I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.