NSC Jan 18th, 2014: $60 strike for $6.30. As a result of this trade $6,000 of my cash is locked down for the duration of the put, but I pulled in $630 from the sale, that is about a 10.5% annual return. NSC currently pays an annual dividend of $2.00. If I am assigned the stock, my yield on cost will be ~3.7%. Norfolk Southern Corp (NSC) is a freight railroad transportation service that operates throughout the Eastern US. Approximately 30% of its freight revenues come from transporting coal from mines to power plants, with another 50% of its revenue coming from the transport of general merchandise, the rest of its revenues coming from the transport of automobiles and chemicals. Currently, the stock is trading very near it’s 52 week low, one of the criteria that I look for when I’m considering writing a long-term put.
INTC Jan 18th, 2014: $20 strike for $2.30. As a result of this trade $2,000 of my cash is locked down for the duration of the put, but I pulled in $230 from the sale, that is about an 11.5% annual return. INTC currently pays an annual dividend of $0.90. If I am assigned the stock, my yield on cost will be ~5.0%. Intel (INTC) is the world’s largest chip maker for microprocessors and personal computers with three main business segments focusing on PC clients, data centers, mobile devices and other consumer electronics. Currently, the stock is trading very near it’s 52 week low, which is one of the criteria that I look for when I’m considering writing a long-term put. See my recent dividend stock analysis of Intel.
Both of these put options carry the risk that I might be assigned the stock. In that case, the cash that has been locked down (“secured”) will be used to purchase the stock at the strike price indicated. While this is not my optimal scenario, I feel that this is an acceptable risk given my overall positive opinion of these companies.
Disclaimer: I am short NSC and INTC. I am also long INTC. See my portfolio or my current holdings. I am also considering going long NSC in the future.
Readers: What options are you writing or thinking about writing? What stocks are you looking into?