Well, it’s been an interesting two days in the market. The Jackson Hole sell-off on Friday and the drop today on fear of certain rate hikes that may slow the economy. The market is bouncing back a bit so we can manage two of our positions today.

Buy/Write

Dow Inc.  (DOW):  53.47

Dow stock price dropped today on an analyst downgrade. We get this a lot … one moment an upgrade lifts the stock price and another time it’s an analyst downgrade that sends the stock lower.

We’ve mentioned before that DOW has challenges related to supply chain issues and the potential economic downturn but we still expect it to hold their dividend rate and trade reasonably well. DOW goes ex-dividend tomorrow and we need to buy the stock to capture the dividend. The sell-off has put the stock “on sale” today. Let’s enter back into this position to collect the dividend with a buy/write.

ACTION:  Open a DOW Buy Write buying the stock and selling the 16 Sep 55 call for a net debit of around 52.90 to 52.94

Buy DOW stock at market (53.50)

Sell to open DOW 16 Sep 55 call for a net credit of around 0.63 to 0.65

OPEN Covered Call

Rio Tinto (RIO):  59.65

Rio Tinto’s stock price has not been able to find a foothold recently despite good news … China’s energy shortage is boosting demand in Asia, copper prices are rebounding and Rio’s plan to complete the take-over of the miner Turquoise Hill Resources appears to be going through.

We’ve been waiting for an entry price to sell a covered call. Let’s go ahead now with might be a technical slowdown in the stock’s volatility and sell a call. Remember, RIO only has monthly options.

ACTION:  Sell to open RIO 16 Sep 62.50 call for a net credit of around 0.60 to 0.65 and a 1.1% return.