Home Articles Options Writer Series — Where To Find And Monitor Great Stocks For Income

Options Writer Series — Where To Find And Monitor Great Stocks For Income


By Warren Kaplan

The Stock Option Writer

© Warren Kaplan 2011-2014

January 22, 2017

I am a huge fan of the stocks listed on the S&P Aristocrat list.  The list consists of stocks that have raised their dividend every year for at least 20 years.  The best way to monitor the list is to write to ben@suredividend.com. Ben’s service is a must for anyone who manages his or her own portfolio. For anyone who is paying for management of their account, Ben’s service can save you thousands of dollars a year.

I just got my Barron’s dated  January 16th. I always get my Barron’s on the Saturday before the date.  This issue is Part 1 of their comments from the round table.  Although I like to see what others are thinking about 2017, my horizon is much further out. Warren Buffett’s horizon is like 20 years. That avoids the immediate emotional issues. No wonder the guy is a long-term successful investor.  Interestingly, his company does not pay any dividends but his company will not buy anything that does not pay a dividend or interest.  If you invested $1,000 in Berkshire back in 1964 when Buffett took over and never touched the stock and never panicked, it would have grown to $10,500,000 according to Elena Holodny of Business Insider. That would mean you didn’t get scared about the Viet Nam War, Nixon, the hate between Democrats and Republicans, race relations, crime waves, Russian threats during the cold war, The recessions of the ‘70s, the oil wars, the folly’s during the sweater wearing Jimmy Carter administration, and I can go on and on but you get the point. Of course picking the right stocks for the future with a lot of luck is critical. The reason I mention Ben Reynolds service is because the stocks he reports on are those that have treated their shareholders fairly throughout the years.  If you want to see more data about the results of investing in Warren Buffett, see http://www.businessinsider.com/if-you-had-invested-with-warren-buffett-2014-8

Another approach to long term investing is to just add certain ETFs to your IRA or Roth account.  I can tell you from experience that selling cash covered put options or covered calls on liquid ETFs is difficult. Premiums are small and I was not able to add much to the return I got. Due to the bull market, I sold some ETFs that I really did not want to sell but I did end up with a large capital gain. I sold covered call options just to add a few dollars to my dividend return. Also, I just did not spread my options further out at critical times.  I ended up making money and having cash I did not want. Well, no matter, it happens. Even when Babe Ruth struck out the Yankees won anyway. Buffett currently has a major bet in IBM and after 7 years, he is down billions of dollars. However, that “down in value” does not include the dividends he has received and my understanding is that with the dividends, his investment is up. My info is from watching CNBC.  

Jan. 18, 2017

PFE has been drifting down and I have been continuing to sell cash covered puts.  For Jan 20 $32.50 puts, on Jan. 11, I received $.36 for a potential 40.57% annual return.  On the same day, I sold $32.50 due Jan 13 for $.23 for an annual return of 90.00%. On Friday Jan 13, PFE closed at $32.52 on those puts closed obviously worthless.  A huge percentage uncommon profit. At this time PFE is $32.03. So, I intend to start spreading (buy the expiring in the money put and simultaneously sell a longer term put) the $32.50 puts in my trading accounts but I will absorb the $32.50 stock and sell calls. The stock goes ex-dividend around April 1, 2017 for $.32. The call premium income will add to my returns. In my trading accounts, I will just execute a credit put spread and take in more cash. I have to keep away from options expiring Jan 27 as Judy and I will be on NCL’s Epic heading to Tortola in the British Virgin Islands. Did I mention the NCL is offering a free 24/7 open bar and they offer a variety of wines for us to try?  Readers know that I feel strong about spending some of my profits for the better things in life such as ocean cruising.

Although PFE is not an S&P Aristocrat stock, (they reduced the dividend in 2009), the company has raised the dividend every year for the last 6 years. And sports an above average yield.

One of the S&P Aristocrat stocks that Ben follows is ADM. This week, I sold February 17th $35 puts for $.84 and $.82 for a fat annual yield of 24+%.  It appears that I will not be buying HRL (Hormel Foods) this Friday. I wrote a lot of January 20th puts at $35 (in excess of 80 options) that will expire worthless.  I have sold many $35 puts on HRL that will expire in February 17th and March 17th.  My annual return on those puts is nearly 40%. Since my overall goal for this year is 10% - 30%, I love those above goal returns with what I consider less risk. HRL is an Aristocrat stock and has increased its dividend every year for over 50 years.

You can find all of the Aristocrat stocks at Ben’s site www.suredividend.com

Think like Warren Buffett. What stocks do you want to own 20 years from now when you need money and stay with dividend payers, as the compounding effect is enormous?  

Warren Kaplan has been writing options for 50 years. He has been a stockbroker, investment banker and brokerage owner.  He currently owns and operates Kaplan Asset Management, a provider of financial assistance for small to middle market businesses. He has more than a half-century of experience in dealing with financial markets, giving guidance and consulting with management, and assisting in the development of business strategies and solutions. The Company has assisted and consulted many successful companies, such as Natures Bounty (NBTY) and Action Products International (APII), helping them to go public and trade on the NASDAQ stock exchange. His philosophy is to “do something with the profits.” “If you make $100 in the stock market, take 50 percent and invest it back into the market. Then, take the other 50 percent and buy yourself something.”

Additional disclosure: I am not a registered investment adviser and I do not give investment advice. Nothing in this article should be construed as investment advice. Investors are encouraged to do their own research and seek the advice of an investment professional before investing. Writing options is not for everyone.  This article was written for informational purposes only.