I like DOW, we talked about them a little while ago - it's a great bargain at $64, which is $48Bn and they are good for $5Bn a year so fairly valued and a great long-term play. They pay a $2.80 (4.5%) dividend, so worth owning in the Dividend Portfolio as:
- Buy 500 shares of DOW for $63.90 ($31,950)
- Sell 5 DOW 2023 $62.50 calls for $8.50 ($4,250)
- Sell 5 DOW 2023 $57.50 puts for $8 ($4,000)
That's going to be net $23,700 on our first 500 shares so $47.50 each is a 25% discount off the current price and, if assigned 500 more at $57.50, our net goes up to $52.50, still 17.8% cheaper than it is now.
In the LTP, we can be a bit more aggressive with:
- Sell 10 DOW 2023 $60 puts for $9.25 ($9,250)
- Buy 20 DOW 2023 $55 calls for $12.50 ($25,000)
- Sell 20 DOW 2023 $70 calls for $5.55 ($11,100)
That's net $4,650 on the $30,000 spread so we have $25,350 (545%) upside potential at $70 and we're about $17,000 in the money to start. Aren't options fun? Very happy to DD on that if it goes lower, of course.
