JXN has earnings tomorrow and I don't want to see them get away.
They are the largest annuity provider in the US with $359Bn under management. You would think Retirement Funds would be a growth industry as the population ages. This was a division of Prudential (PUK) that spun out in 2021 during Covid so they ended up being mis-priced as people weren't paying attention.
No debt, $1.2Bn in earnings with good growth prospects yet you can buy the whole company for $2.5Bn at $28. They also pay an 8% dividend ($2.20)!
In our Dividend Portfolio, let's:
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- Buy 1,000 shares of JXN for $28 ($28,000)
- Sell 10 JXN 2024 $30 calls for $5 ($5,000)
- Sell 10 JXN 2024 $25 puts for $6 ($6,000)
That's net $17,000 and if we are called away at $30, we make $13,000 plus 6 dividend payments of $550 ($3,300) is $16,600 (97.6%) - that is not bad for 18 months in a boring dividend play.
In the Earnings Portfolio, let's:
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- Sell 10 JXN 2024 $25 puts for $6 ($6,000)
- Buy 20 JXN 2024 $30 calls for $6 ($12,000)
- Sell 20 JXN 2024 $40 calls for $2.65 ($5,300)
That's net $700 on the $20,000 spread and our worst case would be owning 1,000 shares at net $25.70 - about 10% off the current price. This is one of those that we hope will go lower so we can get more aggressive but, if not, we'll have to be satisfied with the upside potential of $19,300 (2,757%) at $40.
