I will pound the table over and over again that buying quality on the dips and grabbing healthy premiums month over month is the ONLY way to play this market. I really don't think there is such a thing as a long term investor anymore, the world is changing so fast and technology is changing faster and putting money in a company and hoping, wishing and praying it goes higher is suicide. More often than not, the lower the stock goes with no downside protection, the longer the investment outlook is due to rationlization. I will not provide big in depth explanations of what the following companies do, I will get right to the point with the facts and figures and let you decide. Good luck as always and if you are in NY stay cool this weekend!!
Rayoiner (NYSE:RYN) is one of the only timber REITS that has not slashed its dividend due to poor cash flow from weaker timber harvests, a result of a poor housing market. The stock is $43.72 so look at the August 45 calls at $.80 with is a 2% premium. If you lose it in 2 months at $45 you made roughly 5% on your money. The stock also boasts a 3.6% dividend but you won't get that unless you keep writing through the next quarter.
USG Corp. (NYSE:USG) is another housing market sensitive company. It trades in a nice range, and has paid covered calls writers handsomely over the past 3-4 months. It is currently trading at $16.05 and the July 16 calls for a straight premium play is worthwhile at $1 per contract. That is 6.2% for the month. If you have to give back the nickel from the $16.05 price so be it, or just leave a limit order at $16 to buy in. It is up 13% for the past 52 weeks but there is room to grow. We can address a quarterly option with a higher strike price in August but for now, take the money and see what happens.
ABB Ltd. (NYSE:ABB) is a worldwide leader of power and automation technology and procurement for the industrial and utility sector. The stock has been beaten down to $15.95 which is fine with me as the July 16 calls are paying over 3% premium. The 4.2% dividend won't apply until later in the summer if you still own it, and while I think there is plenty of upside, just grab the quick money and see where the chips fall in August. It is down 35% in the past 52 weeks, so a bounce may take you way above the strike price, but don't stray from total return analysis. You can always buy some and keep it on the side uncovered but that goes against my grain!
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.