The S&P 500 continues to hover and hold at the 3900 level. After a couple of down days, most of our stocks are up today. We remain cautious in this current market environment, but “market up” days gives us a chance to manage a couple of our current positions.
IBM (IBM): 127.23
We’ve said it before that IBM stock behaves more like a “value stock” rather than a tech stock these days. It has been trading in the 125 to 135 range through the market ups and downs of this summer. We can manage trading in this kind of pattern and continue to sell calls for a decent credit.
ACTION: Roll the IBM 9 Sep 136 call to the 23 Sep 131 call for a net credit of around 0.78 to 0.80 and a .6% return
Buy to close IBM 9 Sep 136 call
Sell to open IBM 23 Sep 131 call
Philip Morris (PM): 94.48
As we have reported before, Philip Morris’s business has been hurt by the Russian/Ukraine war due to factory closings in that region and limited market access in Eastern Europe. Sales are down this year but the company has delivered solid quarterly EPS performance. The stock price has continued to bounce in a trading range of 94 to 100. Philip Morris trades as more of a defensive stock, especially in current market conditions where inflation and Fed rate hikes have hit a number of favorite S&P 500 stock prices.
Recently, there have been rumors that the tobacco companies (PM and Altria (MO) may cut their dividends later this year. Philip Morris has a cash payout ratio of 62.63% which is higher than most of our portfolio stocks but is consistent with PM’s ratio average for the last 10 years. We suspect that the next two quarterly dividend payments are safe and we’ll watch this stock as we head into 2023.
ACTION: Roll PM 9 Sep 99 call to the 23 Sep 97 call for a net credit of around 0.65 to 0.70 and a .7% return
Buy to close PM 9 Sep 99 call
Sell to open PM 23 Sep 97 call
Southern Co. (SO): 79.42
Our lone utility stock has held up in choppy market conditions. Southern Co. continues to maintain a hefty free cash flow position supporting its dividend payments. Investing and trading in companies like SO that can safely meet their quarterly dividend obligations is a key factor in finding and sticking with good Triple Play Income stocks.
The stock is up 2% today. Let’s roll our 9 Sep 79 call out 2 weeks.
ACTION: Roll the SO 9 Sep 79 call to the 23 Sep 79 call for a net credit of around 0.75 to 0.85 and a 1% return
Buy to close SO 9 Sep 79 call
Sell to open SO 23 Sep 79 call
New Members: If you are not in SO stock at this time, you can buy the stock at market but sell the 23 Sep 80 call for $1.00.
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