Entering text into the input field will update the search result below

Newell Brands: Long And Writing Covered Calls After Recent Run-Up

Jun. 09, 2020 3:00 PM ETNewell Brands Inc. (NWL)4 Comments
John Alford profile picture
John Alford


  • I have been long Newell Brands for some time, taking advantage of the nice dividend yield and the turnaround program.
  • After running up into the mid-20s, the "COVID-19 Collapse" was brutal to the stock price, cutting it in more than half.
  • I added some shares with a "buy-write", not expecting the recent jump.
  • Friday, I rolled out the "buy-write" calls at a small credit and wrote slightly out of the money covered calls on the remaining long-term shares.

Newell Brands (NASDAQ:NWL) is a mainly consumer-goods conglomerate with smaller commercial products lines business as well. I've previously written on Newell Brands, both analyzing the company's prospects as it attempted to recover from some ill-advised growth which resulted in too much debt and also how I was writing covered calls on my position to increase returns. I was holding a position in Newell Brands in March when the market tumbled. Like many investors, the rapid drop across the market and, especially, in certain stocks caught me by surprise. As my stock account was heavily invested in REITs along with Newell Brands, I suffered great losses. Newell Brands fell from a 52-week high hit last fall of nearly $21 a share to a low around $10.50 by March 23rd.

First, Stop the Bleeding

When the share price rallied to $14 a share (slightly above my base as I had previously written covered calls which had expired), I sold 1/3 of my position and all the reinvested dividends. I mainly did this to increase the size of a REIT position in a "best in class" performer that was trading at a valuation and yield it hadn't hit in many years. I wasn't overly pessimistic about Newell Brands, as I think long term, their core products and the turnaround plan are still intact. This sale closed on 4/28. Little did I know that merely days later, the stock would drop over 10%. I wasn't looking to try to "range trade" the stock but was able to buy back the core position by early May.

Buy-Writing, Or How To Get An Immediate "Dividend"?

Since I had sold part of my position at $14; when I bought it back, I checked out the $14 calls. The share price had only been above $14 a few days since the March drop, and I

This article was written by

John Alford profile picture
Conservative individual investor that tends toward value investing but not exclusively. Learning new strategies and look forward to sharing in dialogue with others here to learn. I taught a financial management for non-financial managers class as an adjunct professor that touches on financial statement and project financial analysis but am on an extended sabbatical due to other time commitments. At times a Seeking Alpha Top 40 REIT Contributor, Top 100 Mutual Funds and Financials contributor. Occasional blogger and public speaker on financial, political and spiritual education and improvement.

Analyst’s Disclosure: I am/we are long NWL. 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.

I have written covered calls with differing strike prices on all my shares. 1/3 of these calls are "in the money", meaning I could be called out of that portion of my long position at any time. Information presented is for educational purposes only and does not intend to make an offer or solicitation for the sale or purchase of any specific securities, investments, or investment strategies. Investments involve risk and unless otherwise stated, are not guaranteed. Be sure to first consult with a qualified financial advisor or tax professional about your specific financial situation before implementing any strategy discussed herein.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

Recommended For You

Comments (4)

John Alford profile picture
Update as of Thanksgiving weekend: All of my calls have been assigned after the recent run-up into the $21 range and one had a strike price of $15 so knew it was likely. Diversifying a bit as I was a bit overweight in $NWL. While I think the company is doing well, the entire market has surged in the past few weeks and could get back in in the $17-$17.50 range. If not, still a successful investment and if others are still long, think long-term this is a good company. Just not sure it will go too much further short-term.
John Alford profile picture
And to update this series of calls gain/loss from the article: My net gain (now)appears to be $.29 (1st covered call) + $.08 (2nd covered call) + $.33 (today's covered call roll out) + $.23 (May dividend) + $1.60 (capital gain if called out) = $2.53
John Alford profile picture
I rolled out the soon to expire July 17 $14 I had previously rolled out at a nice credit until August. Earnings and the SEC request for information will play out by then. Will watch to either roll it out again or, if share price drops close to $14, buy to close.
earlyriser profile picture
I also wrote calls against my NWL position last week. Got about a dollar out of July $15's.
Disagree with this article? Submit your own. To report a factual error in this article, . Your feedback matters to us!
To ensure this doesn’t happen in the future, please enable Javascript and cookies in your browser.
Is this happening to you frequently? Please report it on our feedback forum.
If you have an ad-blocker enabled you may be blocked from proceeding. Please disable your ad-blocker and refresh.