A Strategy To Get Through Periods Of Uncertainty - Part II

 |  Includes: AA, ANRZQ, ARCH, CHK, MGM
by: The Financial Lexicon

In my article, "A Strategy To Get Through Periods Of Uncertainty," I outlined a strategy of hedging exposure to individual bonds with put options on the company's common stock. I went into great detail about how the strategy is to be executed and under what circumstances an investor might consider doing it. As a follow up to the article, I would like to provide a few more examples of CUSIPs and options strike prices for companies in which investors could consider putting on the long bond, long put strategy during times of macro-economic difficulties.

Below you will find a table outlining details of various company bonds and a put option to consider pairing the bond with in order to hedge your risk of loss:



Company CUSIP Bond Maturity Coupon Current price/yield Debt Ranking Put option
Alcoa (NYSE:AA) 013817AJ0 2/1/2027 5.90% 100.731 / 5.824% Senior Unsecured Jan. 2014, $3
MGM Resorts (NYSE:MGM) 552953BX8 3/15/2022 7.75% 99.45 / 7.829% Senior Unsecured Jan. 2014, $3
Chesapeake Energy (NYSE:CHK) 165167BU0 11/15/2020 6.875% 98.057 / 7.185% Senior Unsecured Jan. 2014, $2 or $3
Alpha Natural Resources (ANR) 02076XAC6 6/1/2021 6.25% 87.45 / 8.258% Senior Unsecured Jan. 2014, $3
Arch Coal (ACI) 039380AC4 10/1/2020 7.25% 84.00 / 10.144% Senior Unsecured Jan. 2014, $3
Click to enlarge

Please be aware that prices in the over-the-counter U.S. bond market may vary depending on the broker you use. I discuss this in my article, "Are You Paying Too Much For Your Bonds?" The current prices may also differ greatly from those listed at the time this article was written. For more information on any of these notes, including additional call or put features, please contact your broker or read the indenture.

Also, please do your own due diligence on the financial profiles of the companies mentioned in this article. Only you can determine if taking the counterparty risk of purchasing individual bonds is suitable for you.

Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.

Additional disclosure: I am long CUSIPs 013817AJ0, 165167BU0, and 02076XAC6.