RCL is a nice cruise company at $105.75 ($22.4Bn) with $9Bn in sales and $1.6Bn in profits so p/e about 14 but growing steadily. They pay a $2.40 (2%) dividend if you own them but we can start a position in the LTP by just selling 10 Jan (as far as they go) $95 puts for $4.50 ($4,500) in the LTP. That's a nice place to start with them with a net $90.50 entry as the worst case. That's really good money for 6 months!
Having looked at the banks, I decided I like C the best at this level ($65.44) as they paid $29Bn in taxes last year (repatriation), so I forgive them for showing a net $8Bn loss. Normally, they would have paid about $7Bn and made $22Bn though usually their income is in the $15Bn range as a $166Bn company, so p/e about 11 but now they have $400Bn in CASH and Short-Term Investments and another $352Bn in Long-Term Investments - but don't get too excited as they are a bank and it's not really their money...
Anyway, it's a good bank and in better overall position than BAC and with less baggage than WFC and JPM is a different animal entirely and $65 should be nice support for them and the 2% dividend is not very exciting so we'll take the following in the OOP:
- Sell 10 June 2020 $60 puts for $6 ($6,000)
- Buy 20 June 2020 $60 calls for $13 ($26,000)
- Sell 20 June 2020 $70 calls for $8.50 ($17,000)
That's net $3,000 on the $20,000 spread that's starting out $10,000 in the money. As C moves up, we can sell a few calls for income but the upside potential here is already $17,000 (566%) if all goes just a little well - so no need to be greedy!
