Weekly Newsletter   Challenge account   Weekly Newsletter   

New Trade – Safeway Inc. (SWY) put selling

I was searching for stocks which I can buy, but couldn’t find anything at a decent price. Everything I was interested in is so elevated that I wasn’t comfortable buying at the current price.

So I was thinking that the only way I would be willing to do is to sell a longer term put option. A reason for longer term put would be that I am expecting a correction in price. If I will be assigned, I do not want to be assigned when the price of the stock gets too low. Longer term put should get me thru a potential market correction.

Next reason would be to generate a reasonable premium income this month to meet my goal.

Next one would be to keep my accumulated cash working and last, when I was searching for a good candidate I was thinking which of the optionable stocks I would be willing to own if I get assigned. And the winner is … Safeway.

Safeway is a dividend paying stock with 7 year consecutive dividend increase. It’s current yield is at 2.80%, the dividend growth is at 20.84% and my calculated fair value is $36.61 a share, so I have 35% margin of safety if I buy at $23.00 a share.

I sold 1 contract September 23 put and collected $220 premium.

03/08/2013 09:31:50 Sold 1 SWY Sep 21 2013 23.0 Put @ 2.2

If I get assigned, I will buy 100 shares at $23 a share. The premium will offset my cost basis to a total $20.8 a share. If I won’t get assigned, I will be repeating this process as long as I get assigned.

I will keep posting progress about this trade in the future.

Happy Trading!

Leave a Reply

Your email address will not be published. Required fields are marked *