Triple Play Income Trade Alert: BX, VALE

Dear Triple Play Income Member,

Several more positions we need to manage before expiration tomorrow.

CF Industries (CF): 87.03

CF Industries stock is trading near its 52-week high and it’s not surprising. Disruptions in the worldwide fertilizer trade due to a number of factors have prices at all-time highs and inventories at record lows. The company has said the global shortage of nitrogen will continue to keep prices high.

We were early into CF stock last June but it’s paying off now. Our 11 Mar 72 put is worth about 0.10 and we can collect more by rolling our position up and out a week ahead of schedule.

ACTION: Roll CF 11 Mar 72 put to the CF 18 Mar 81 put for a net credit of around 1.15 to 1.20 and a 1.3% return

Buy to close the CF 11 Mar 72 put

Sell to open the CF 18 Mar 81 put

For a net credit of around 1.15 to 1.20

NOTE: If you are new to Triple Play Income, you can sell to open the CF 18 Mar 81 put for a net credit of around 1.23 to 1.28.

Kraft Heinz (KHC): 

Kraft Heinz stock has been one of the few upside surprises during the recent market volatility and world events shaking the stock market. Part of that is good news from their recent 4th quarter earnings report beat EPS by $0.16 and revenue of $6.71B beat by $80M. Plus they signed several joint ventures and smaller deals that Wall Street seems to like.

Our 4 Mar 36 call has gotten run over with no chance to pick up any reasonable premium by rolling. Let the stock be called away this weekend.

ACTION: No Action. Let KHC stock be called away.

Philip Morris (PM):

Philip Morris stock price has always been a nice contrarian indicator for our portfolio … holding up when the market is down and a slow mover when the market starts racing up.

Well, Russia finally caught up with Philip Morris. Not surprisingly (if you have ever been to Eastern Europe) tobacco consumption hasn’t slowed in the former Soviet states. The Russian invasion of Ukraine has analysts worried that PM stock could underperform in the short term. In fact, PM has manufacturing plants in both Russia and Ukraine and 2% of PM sales come from Ukraine. And the stock sold off on this news.

The stock price is back up over the last two days but what seemed like our once safe 4 Mar 107 put is in the money. Let’s roll it out strike-to-strike for now.

ACTION: Roll the PM 4 Mar 107 put to the 18 Mar 107 put for a net credit of around 0.55 to 0.60

Buy to close 4 Mar 107 put

Sell to open 18 Mar 107 put

For a net credit of around 0.55 to 0.60

Note: If you are new to Triple Play Income, we would recommend you hold off taking a position in Philip Morris (PM) until there is a little more clarity in conflict and its impact on PM.

David Durham

Triple Play Income