Buy AT&T While Market Conditions Are Favorable [View article]
The PE is not 50, even though that number is widely reported. Go look up the actual quarterly earnings and calculate the TTM PE - you will find it closer to 15. Reported PE for this stock is distorted by the cash payout to T-Mobile when the merger failed.
I'm finding similar discrepancies on many stocks, in PE and in Payout Ratios - what is shown on the SA, Fidelity, Yahoo, etc. pages is not really the right number. You have to do your own research to verify the numbers.
Going With Goldman On Marathon Petroleum [View article]
Bret, how do you think MPC compares with PSX? (I too have some as a result of the COP split, and it has appreciated nicely so far.) Specifically in terms of future dividend growth as well as capital appr.
4 Things You Should Know Before You Trade Covered Calls [View article]
They don't need to segregate, just reduce the tradeable cash balance. I get that Fidelity is managing their lawsuit risk with this policy, what puzzles me is why they allow trading on margin in the same account that they refuse to allow selling puts.
How Dividends Could Yield 30%+ Annually Over The Next Decade (Or Two) [View article]
Thanks Jeff, that was a very good article, love the rigorous approach. Also love that you made the spreadsheet downloadable, so we can all play with your toy!
Although constant DGR and constant inflation rate are not realistic assumptions, I think what really matters is the differential. Untested Hypothesis: the spread between inflation and dividend growth should exhibit less variance than either parameter. Go do the math and let me know if I'm right, willya? :)
4 Things You Should Know Before You Trade Covered Calls [View article]
REH - I know that. Fidelity also will not allow me to sell puts in a taxable, margin account. Want to guess why? Because I do not lie on my application and claim years of experience in trading options. They will allow me to sell covered calls, but not cash-secured puts. Their policy is based on the reasoning articulated in the comment above by A Wangelin.
Enhancing A Gain On AT&T, Altria With Options [View article]
omttepescott - Options are bewilderingly complex! It took me a year of study and paper-trading before I got confident enough to sell my first call. I can recommend a book, "The Beginner's Guide to Options" by Mark Wolfinger, it really helped me understand how these things work.
The options chain is still overwhelming though... until you learn to screen it down to the ones that you might actually be interested in, then it looks a lot more manageable. For instance, I ask for Call options only, and specify a range of strike prices close to the money, since that's where you'll find the best prices. (I could also specify options with open interest, accomplishing more or less the same thing.) Then you are presented with a much shorter list, and the choices become clearer.
Dividend Challengers: 20 Increases Expected In The Next 11 Weeks [View article]
I think EEI looks undervalued on the FAST graph because of the "normal" PE of 29.3 is much too high. TTM PE of 9 might be too low as well, but a 29 PE seems too much for this company now.
4 Things You Should Know Before You Trade Covered Calls [View article]
Agree about the mentality. When I sell a call, I am making a sell order on the underlying. Look at it like a GTC limit order to sell, with an immediate cash kickback and a delayed execution. Mentally I've already sold the stock.
Selling calls on a stock I wanted to hold seems crazy to me. As noted in my previous comment, that would require me to accurately predict not one but two things about the future, and I'm not confident in my (or anyone's) ability to do that.
I'm using covered calls as a way to make myself lighten up on stocks that have appreciated and now are overweight in the portfolio. For some reason, picking a sell target is harder for me than picking a call price.
2 Affordable And Promising Stocks Yielding At Least 7% [View article]
Might have been good to mention these are both REITs... for which the PE is not a particularly relevant metric. P/B is more useful to me for these stocks - especially when shopping for value. That said, thanks for the pointer to CLNY, I will look into that one. It has a low P/B and a relatively low (for a REIT) payout ratio.
I keep looking at this one, thinking it's a value play, but always end up concluding it might be a value trap instead. The PE is compressed but the future earnings growth is very uncertain, and the dividend growth has been erratic. Good news would probably trigger a quick move up, though.
4 Things You Should Know Before You Trade Covered Calls [View article]
Good article, especially the four suggestions at the end.
I tend to agree that covered call selling is riskier than commonly supposed, and that put selling is not that much different. (I wish I could convince Fidelity of this last point. Allowing only call selling restricts the market conditions under which I can safely engage in options trading. Seems to me that increases the risk of making bad trades.)
I'd also quibble about this statement: "The only alternative is to buy back the short call for a significant loss in order to continue holding the stock." There are other alternatives. The simplest would be to allow the stock to be called, and move on to the next trade; but you could also roll out the option.
The biggest problem I have with options is that you have to be right about two things - price direction AND timing - which is approximately 4 times harder to do than just being right about one.
Enhancing A Gain On AT&T, Altria With Options [View article]
Funny you mention CMO - I have a nice double-digit cap gain that one, which also (perversely) makes me a bit nervous and wondering if I should sell calls on it, too! But then I'd have to reinvest in another REIT anyway, so no net gain to that strategy unless a dip is coming.
Great Dividend Payer, Well Hedged Linn Energy May Be Among The Best Buys [View article]
LINE seems like a good candidate for enhancing yield with covered option writing, as it appears range-bound. If Fidelity will ever allow me to sell puts, I might start with LINE as it is in the bottom of its range.
Buy AT&T While Market Conditions Are Favorable [View article]
I'm finding similar discrepancies on many stocks, in PE and in Payout Ratios - what is shown on the SA, Fidelity, Yahoo, etc. pages is not really the right number. You have to do your own research to verify the numbers.
Going With Goldman On Marathon Petroleum [View article]
Recent Strength In Oil Services Sector Could Lift Baker Hughes [View article]
4 Things You Should Know Before You Trade Covered Calls [View article]
How Dividends Could Yield 30%+ Annually Over The Next Decade (Or Two) [View article]
Although constant DGR and constant inflation rate are not realistic assumptions, I think what really matters is the differential. Untested Hypothesis: the spread between inflation and dividend growth should exhibit less variance than either parameter. Go do the math and let me know if I'm right, willya? :)
4 Things You Should Know Before You Trade Covered Calls [View article]
Enhancing A Gain On AT&T, Altria With Options [View article]
("Experience is what you got when you didn't get what you wanted.")
Enhancing A Gain On AT&T, Altria With Options [View article]
The options chain is still overwhelming though... until you learn to screen it down to the ones that you might actually be interested in, then it looks a lot more manageable. For instance, I ask for Call options only, and specify a range of strike prices close to the money, since that's where you'll find the best prices. (I could also specify options with open interest, accomplishing more or less the same thing.) Then you are presented with a much shorter list, and the choices become clearer.
Dividend Challengers: 20 Increases Expected In The Next 11 Weeks [View article]
4 Things You Should Know Before You Trade Covered Calls [View article]
Selling calls on a stock I wanted to hold seems crazy to me. As noted in my previous comment, that would require me to accurately predict not one but two things about the future, and I'm not confident in my (or anyone's) ability to do that.
I'm using covered calls as a way to make myself lighten up on stocks that have appreciated and now are overweight in the portfolio. For some reason, picking a sell target is harder for me than picking a call price.
2 Affordable And Promising Stocks Yielding At Least 7% [View article]
Corning Is Undervalued [View article]
4 Things You Should Know Before You Trade Covered Calls [View article]
I tend to agree that covered call selling is riskier than commonly supposed, and that put selling is not that much different. (I wish I could convince Fidelity of this last point. Allowing only call selling restricts the market conditions under which I can safely engage in options trading. Seems to me that increases the risk of making bad trades.)
I'd also quibble about this statement: "The only alternative is to buy back the short call for a significant loss in order to continue holding the stock." There are other alternatives. The simplest would be to allow the stock to be called, and move on to the next trade; but you could also roll out the option.
The biggest problem I have with options is that you have to be right about two things - price direction AND timing - which is approximately 4 times harder to do than just being right about one.
Enhancing A Gain On AT&T, Altria With Options [View article]
Great Dividend Payer, Well Hedged Linn Energy May Be Among The Best Buys [View article]