Collecting Extra Cash On The Rose Portfolio Using 2 Simple Options With 40+ Revealed

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Includes: ABBV, DEO, KIM
by: RoseNose
Summary

Revealed are 40 mostly different of the 70 options currently active within the 94 stock Rose portfolio with individual expiration from June 2019 to Jan 2020.

The 2 most basic selling options are covered calls and cash secured puts are presented simply with examples I recently used for the 94 stock Rose portfolio.

Some simple reasoning for understanding of the what and why of doing them is also provided.

Simple Options is the focus of this article to make extra cash without putting the portfolio in any type of jeopardy. I retain core positions and it is instructive knowing price valuations for each and every stock owned.

I do not trade options I only sell them and love getting paid to do so. This is a hopefully easy to learn and enjoy method for you to do it as well.

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OPTIONS

The 2 most basic options which will be discussed involve collecting cash to do them. They are the covered call and cash secured put which will be defined with examples for you to follow. I love getting paid extra cash on shares I already own or for offering to buy more of any of them.

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First Step of Simple Options

Apply for Level 1

Simply apply with the broker to do level 1 options which gives you the ability to see the option chain tables. Apply, get going and know it is free for the asking. The brokers love the extra fees they can collect and will be pleased to get you started. Level 1 is where these simple options are done, and where I still remain happily doing what is needed for the portfolio. Buys are done at this level too, of which I have done rarely, and only to close out a position early. I will not show that in this article, but only mention it for completeness. It does cost to do so, and generally will be offset by the larger original gain. Level 2 has more advanced type of cash generation with more risk, such as naked calls and more. Perhaps someday I will find the desire to apply, but I find no need as yet for those.

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Simple Option #1

Sell a Covered Call

- own 100 shares

100 shares =1 option transaction for most all major brokers. The shares are offered as collateral to cover the transaction. You will still collect dividends as the actual shares are frozen out only from any other type of transaction until the expiration of the option.

-Determine Premium

The premium or what you get paid is what makes the whole process worthwhile, but is the last end product before looking at some major key metrics found on the options chain chart.

The options chain chart

-Stock ticker is entered and the current price is shown per share, below is one for Dominion (D) from TD Ameritrade.

Important to note, all the strike prices and premiums in the chart are per share. At the end of the process everything will be multiplied by 100 shares for the final price for the one option.

Look at the chart and examine the metrics as follows:

-Expiration date is the primary method for changing the chain chart. It appears in the drop down box at the top center of the chart after the ticker symbol. This also defaults to showing 10 different price strikes that run down the center of the chart. I chose Jan 17 2020 expiration date as I have this actual stock and the actual call option. It will be shown in my list to follow.

-strike price for selling, which again appears down the center of the chart.

The bid and ask premiums are shown for both types of selling. Calls on the left of the strike column and Puts on the right.

The bid is usually the premium you can count on getting. The ask premium is someone bidding usually above the normal and not completed. One just needs to click on the price in the line interested and it will auto fill the information into the bidding chart that will then appear next.

I am looking here at the call side or the left side of the strike column and the

$77.50 strike with the bid of $3.10 as the premium per share.

I decided to enter in the limit box $3.25 for this example, which is shown below.

Important to watch is the top line of the Single order and Sell to Open: 1 contract. I also only want it to last the day and that shows as the time in force. Make sure it still says SELL to open as I have seen that box switch.

This now has the premium calculated for 100 shares ($3.25 x 100) = $325.

All transaction costs and final fees will also need to be considered. One fee is usually only charged for each stock, so doing more than 1 option would carry no extra fee.

This page also shows on the right my current holdings which I did not reveal here. The broker already knows what is owned and will place a hold on any optioned shares until the option expires.

There is 90 seconds for the order to be placed or even changed. It does not included any fees involved. I did not place this one and don't know if the price would be accepted. If it is accepted the final fees will be removed and the full amount of the order is placed as cash into the account. That cash payment is final and can be used for anything else desired with no restrictions.

From my experience even picking the lowest bid price usually gets you the option and for even more than what was entered in the limit price box. I believe in trying for the most, but it can be time consuming, but still worth trying. If not accepted it will show up as pending orders and those can also be changed during the trading day.

Once the option is complete it means that if on Jan 17th 2020 the stock price is below $77.50 the option will expire and the shares remain mine and are unfrozen in the account. If the price is more than that, the shares will be sold and the full amount of $7750 less fees, $17 for me, nets me $7733 on the sell. Remember I already got $325 for doing the option as above (less ~$6 fees), which brings the final value up to over $8150. I would be fine with selling at that price and my transaction at this $77.50 strike is shown in the list to follow. The option may be bought back in time to release the shares, sometimes very profitably even before expiration, but most times not. I find it best to just let it all ride to expiration.

Important note about selling or buying shares with options. Sell outright if you want to divest yourself of the shares fast and like the current price. Using an option generally is not the suggested way to exit quickly or even buy if you like the price now. The future cannot be known, so be aware and happy on the day the option is placed for the price you might get for success in doing it. Be satisfied. That would be the outright way to buy too, but options can give you a better price in all matters if desire it. Sure the price can go in both directions, so be prepared for that as well. Also watch for dividend ex-dates and earnings report dates which can move share prices, try to avoid an option near those type dates.

OPTION #2

Cash Secured Puts

If you want to buy shares, selling a put is an easy way to do it if you are not in a hurry. Buy shares now if you want them now and then try the option method for a better price. I have done both and most recently with Vodafone.

To sell a put just means you get paid to offer to buy shares at a set price and must also have cash sitting in the account to cover the purchase of each 100 shares = 1 option for it. The price you want to pay for a great deal or happy satisfied deal should be known and then look for a premium to get to that price.

Starting with the expiration date is where to begin and determining having the cash tied up for the time period of the option makes it all worthwhile. Sometimes just buying the stock and collecting the dividend is just as smart and must be considered.

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Cash is Frozen

Getting a nice yield on the cash held or frozen at the broker for the desired option is important because if the shares are not acquired, the cash will have returned that nice yield, as my next example will show.

Example: Option chain for Iron Mountain (IRM) from TD Ameritrade on May 28th, 2019.

Look to the right side of the Strike middle column for the Put information.

IRM was selling at ~ $31, so I picked a strike of $32.50, here showing $3.30. I wanted the shares and therefore this was a generous premium as it was ITM (In The Money), or over the actual price I could buy shares outright. This is the options chain for May 28th 2019, but I had a bit better premium on May 7th of $3.60 when I did the option.

-What I pay if I get the shares:

I will pay $3250 for 100 shares+ $17 closing fee = $3267. I have already received $354.32 after fees for doing this option, so my cost will be ($3267-354.32= 2912.68). This is under $30 per share and a happy Rose.

-What did I get paid for having my cash frozen and got no shares:

If I do not get the shares I take home the cash already received or $354.32.

I had frozen $3250 for ~240 days in the account (May 7th to Jan 17th). This equates to ~16.6% annualized as follows and is just to show you an approximate yield and is not necessarily exact.

($354.32/3250) X (365 /240) = 0.1658 = 16.6% and still a happy Rose.

Win, Win to me.

40+Options List

Here is my option chart with some of my current activity for the portfolio.

I have more strike prices on multiple stocks and they are not all shown.

The price was for May 28th, 2019.

The list is by date of expiration with the most recent at the top.

I included not an exact estimated price for each share if the option wins.

Net Pd is what I have received already for the option and is mine to keep.

I have approximate # of days in the option for the put and what is the annualized yield it would provide.

Many options may be called early by the broker and not everyone of this will make it to expiration, but most should. The Diageo (DEO) option call is an example of one I expect to be called away early as I am amazed at how expensive it has become.

ACTIVE Call Put
Price Ends Strike Pr w/Opt Premium Net Pd Pr ATW Date #days % Yld
43.49 21 Jun Intel (INTC) INTC 1 60 61.3 1.38 132.34 50 8-8
78.97 AbbVie (ABBV) ABBV 1 80 74.4 5.6 554.33 80.5 1-25 150 16.9
75.86 Valero (VLO) VLO 1 75 72.2 2.95 289.33 82.75 2-8 140 10.1
80.17 19 Jul EPR (EPR) EPR 1 75 76.1 1.1 104.34 69.77 1-16
130 Kim-Clk (KMB) KMB 1 130 132 2.11 205.33 118.83 2-12
169.93 Diageo (DEO) DEO 1 150 152.75 2.85 279.34 142.45 1-24
48.09 Alliant (LNT) LNT 2 45 46.7 1.73 339.62 44.6 2-7
83.37 WPCarey (WPC) WPC 1 75 76.9 1.95 189.33 74.56 2-21
16.02 Vodafone (VOD) VOD 1 20 17.2 2.94 288.33 18.08 2-26 150 35.1
49.42 16 Aug Coke (KO) KO 2 49 50.5 1.55 303.62 47.23 1-14
162.63 AutomDP (ADP) ADP 1 165 167.2 2.23 217.33 145.91 2-8
9.53 20 Sept Teva (TEVA) TEVA 1 19 21.3 2.31 225.33 18.64 2-11
29.75 Stag (STAG) STAG 1 30 30.96 1.02 96.33 29.5 3-29
83.37 18 Oct WPCarey (WPC) WPC 1 75 77.5 2.51 245.33 74.52 2-21
83.37 WPCarey (WPC) WPC 1 75 78.9 3.9 384.32 77.31 3-15
18 Kimco (KIM) KIM 2 17.5 18.75 1.25 243.62 18.19 3-22
124.5 JMSmkr (SJM) SJM 1 120 123.1 3.2 314.33 107.32 2-26
16.02 Vodafone (VOD) VOD 1 19 16.85 2.23 217.33 18.22 2-25 180 23.2
54.58 Cisco (CSCO) CSCO 1 55 57 2 194.33 52 3-11
81.2 Target (TGT) TGT 2 90 91.5 1.57 307.62 78.61 3-19
120.45 Digital R (DLR) DLR 1 125 129.2 4.23 417.32 118.32 3-19
81.99 Wi Energy (WEC) WEC 2 80 82 2.2 435.01 77.56 4-12
94.77 Celgene (CELG) CELG 1 100 101.15 1.35 129.33 95.7 5-21
97.83 15 Nov Gen Parts (GPC) GPC 1 120 123 3.1 304.62 112.68 4-17
21.95 20 Dec GEO Grp (GEO) GEO 2 17.5 16 1.57 307.61 19.6 4-16 240 13.4
17.06 Covanta (CVA) CVA 2 17.5 18.9 1.42 279.01 18.01 5-16
2020
65.84 17 Jan Ventas (VTR) VTR 1 62.5 65.25 2.75 269.34 59.79 11-9
53.87 Southrn (SO) SO 2 50 52 2 393.61 49.53 2-12
169.79 SimonPG (SPG) SPG 1 195 200 5.4 534.32 181.72 2-5
97.83 Gen Prt (GPC) GPC 1 120 122.6 2.66 260.33 108.55 2-20
59.59 Verizon (VZ) VZ 1 60 62 2.1 204.33 56.5 2-25
254.75 MastrCrd (MA) MA 1 250 259.6 9.7 964.32 220.19 2-14
164.34 Visa (V) V 1 160 167 7 694.32 148.5 3-5
42.2 Pfizer (PFE) PFE 1 47 48.3 1.31 125.33 43.05 3-5
76.81 Dominion (D) D 2 77.5 80.5 3.07 607.61 75.66 3-5
72.92 Exxon (XOM) XOM 1 90 91.5 1.5 144.33 80 3-11
197.64 McDon (MCD) MCD 1 200 210.15 10.39 1034.51 199.35 5-22
81.2 Target (TGT) TGT 1 82.5 87.5 5 494.32 78.44 3-19
51.27 Gen Mills (GIS) GIS 3 50 52.9 2.92 877.88 49.03 3-20
54.58 Cisco (CSCO) CSCO 1 55 60.1 5.2 514.32 56.75 4-16
9.53 Teva (TEVA) TEVA 1 15 13 2.1 204.33 14.76 4-10 270 18.4
52.86 CVS (CVS) CVS 1 55 49.1 6.05 600.52 53.42 4-23 270 14.8
31.28 Iron Mt (IRM) IRM 1 32.5 29 3.6 354.32 30.99 5-7 240 16.6
130 Kim-Clk (KMB) KMB 1 150 151.7 1.85 180.53 130.2 5-22

"Don't be afraid to sell options, it is a money maker!"

This was one of the first lessons I learned from The Fortune Teller and I totally must give him credit for it. I do not do anything I was not eventually doing with these simple buy and sell transactions with specific prices in mind. Some of it comes from his service, probably most of the better ideas, but I have different stocks in the portfolio and have made many of my own decisions. His service The Wheel of Fortune does more, much more than the simple stuff that I revealed here.

I remain amazed by it all and enjoy belonging there along with he and Trapping Value creating a wonderful window of adventure for all subscribers. The insight into what can be done if I wish, or what others are doing to generate returns, gives insight into the whole realm of possibilities in investing. I continue to stay simple with my options and have learned each and every stock better for over or undervaluation.

Good Luck and try the easy stuff first and make extra cash and have a Happy Investing life.

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Disclosure: I am/we are long ABBV. 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.

Additional disclosure: and all options in the chart + 94 holdings listed on my profile