11-20-2018, 02:51 AM
I currently own a small amount of IBM with covered call of strike 130 of Jan 2019.
My original plan was to close this position by not buying back the call and let the call owner take the stock.
But I am beginning to wonder if it falls below 130, do I continue to own this since we can get around 9% yield(dividend+call premium) by selling strike 120 of 2021, we should have around 25-30% drop protection and assume that all the bad news has been priced into this stock?
Am I falling into a value trap or IBM is worth holding for 9% yield since its a cash flow positive company?
I have a big position in Macys with strike 20 covered call, yield there is around 8% but downside protection around 40%.
If this stock stays around 129-130, I may get out. But wondering if this company can continue to be cash flow positive and pay its dividend for next 2-3 years without further downside, why not own this for nice yield, why do we think the risk outweighs the reward?
My original plan was to close this position by not buying back the call and let the call owner take the stock.
But I am beginning to wonder if it falls below 130, do I continue to own this since we can get around 9% yield(dividend+call premium) by selling strike 120 of 2021, we should have around 25-30% drop protection and assume that all the bad news has been priced into this stock?
Am I falling into a value trap or IBM is worth holding for 9% yield since its a cash flow positive company?
I have a big position in Macys with strike 20 covered call, yield there is around 8% but downside protection around 40%.
If this stock stays around 129-130, I may get out. But wondering if this company can continue to be cash flow positive and pay its dividend for next 2-3 years without further downside, why not own this for nice yield, why do we think the risk outweighs the reward?