Put Selling: ET MAY 17'19 15 Put @0.35

Updated: 23 December, 2019 seen 57

On April 10, 2019, I made following put sell - ET MAY 17'19 15 Put @0.35

This is already the fifth put sell in my short options trader career. For now, it seems I've found my way in options trading - I'm selling puts against (high) dividend paying stocks I already own or I would like to have.

ET stands for Energy Transfer Equity, and I had not a single clue about this company until today, actually, I found this ticker on hellosuckers.net Google Spreadsheets and after a brief investigation, I decided to sell a put on this stock.

ET currently is trading at $15.47 and has a yearly dividend payout of $1.22 giving a yield of 7.88%. Dividends are paid quarterly in the following months - Feb, May, Aug, and Nov. These are the months I'm always worried about, in case I will be assigned ET stock before options expiry I will have 100 shares paying me dividends in lowest months of the year. Awesome.

Got for this trade a premium of $35, but I will be obligated to buy 100 shares of ET if the price will drop below $15 USD per share by May 17, 2019. 

Break-even price: $14.65

Now, this trade actually comes out of my league, as I tend to write puts only on stocks costing ~ $6.00 per share, as $600 is the approximate budget on a monthly basis I can afford to spend with ease and no regrets on options trade. In the case of ET, if I will be assigned 100 shares of it, it will cost me $1,500. To stay on the track here is the plan - I will sell off shares worth $900, leaving me with shares worth $600 or about 40 shares of ET, which I'm ready to hold for long and collect dividends.

This latest trade gives 21.44 % yield annually, which now is second highest after jaw-dropping but risky 54.75% FTR PUT (see: My First Option Trade: FTR Aug16'19 2 Put @0.45)

In case I will be obligated to buy this stock, I already have collected premium, and my real buying price will be $14.65 or just $1,465 for 100 shares of, ET with an annualized dividend at $1.22  that's a decent 8.32% dividend yield.

If I will sell off 60 shares and leave myself 40, in a year additionally I will collect $48.8 in dividends. Or $12.2 quarterly. Sounds good to me

The Bottom Line

By now I have already collected $229.00 in premiums from just 5 option trades. None of my trades yet has expired and by now I have used cash in the amount of $5.600 to secure this trades. That gives us ~ 4% yield so far.