Stock Market News: 09-26-20

Click here to learn how Selling Options can give you more downside protection and more income.
Market Indexes: It was the 4th straight down week for the market, with only the NASDAQ making a gain. Small caps took it on the chin – the Russell 2000 lagged, falling -4.49%, and continues to trail the other 3 indexes by a wide margin so far in 2020.

“Wall Street’s main indexes hit their lowest in nearly 7 weeks on Monday as concerns about fresh coronavirus-driven lockdowns and the inability of Congress to agree on more fiscal stimulus raised fears about another hit to the domestic economy. Click here to read more…

Stock Market News: 4/14/18

Markets: It was an up week for the market, with all 4 indexes posting strong gains, as the market turned in its best performance in a month. Trade war fears ebbed, but investors were unimpressed on Friday by good major bank earnings reports, sending the market down in late trading. Even though JPM, C, and WFC beat earnings estimates, investors were expecting more, due to the anticipated benefits from the tax cut bill. These 3 banks fell from -1.5% to 3.4% on Friday.

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How To Sell Covered Calls

by Robert Hauver
As we approach 2017, in this different market environment, we’ve received many requests recently for a detailed explanation of how to sell covered calls, so here goes:
Our Options & Investing Glossary has this brief definition: “An option strategy in which a call option is sold against an equivalent amount of long stock. Example: writing 2 XYZ May 60 calls while owning 200 shares or more of XYZ stock”.
Why are they known as covered calls? Because the call seller owns a corresponding amount of the underlying shares before selling any call options.

If you don’t own the underlying shares, you’d be selling naked calls, which is one of the most dangerous moves in the investing/trading world.  The old adage, “You’ll lose more than your dignity when you walk down Wall St. naked”, refers to the treacherous scenario of selling naked calls, in which your losses can be unlimited. As long as you own the corresponding amount of underlying shares 1st, you can “cover” your sold calls position.

Let’s dig deeper into the basics:
1. Many stocks have options available, with different monthly cycles, and some highly traded, large volume stocks also have weekly options. In general, the present month and the next month should always have options available. There are also usually other option months in the future, depending on which option cycle a stock is on.
The list of option months and expirations is called an option chain.
2. American options expire after the end of the 3rd Friday’s trading day, with their assignments taking place that weekend. (You’ll usually be able to see the final outcome of your option position by Monday, except on holiday weekends.)

3. One option contract corresponds to 100 shares of the underlying stock. An option’s strike price is the price at which an option seller is obligated to sell the underlying shares, if they are assigned. Conversely, an option buyer pays a premium to buy the shares at a specific strike price.

4. Assigned: When selling covered calls, if the underlying stock’s share price has risen beyond the value of the strike price of the option sold by the seller, his shares will usually be sold, (assigned), by his broker at the sold call’s strike price, usually at or near the expiration date.
Sometimes, your shares may be assigned just before an ex-dividend date, if the buyer wants to capture the dividend $. We’ll discuss a strategy for this scenario later in this article.

Trading Steps:
1. First and foremost, if you want to sell covered calls, you must own or buy at least 100 shares of the underlying stock. It’s also best to buy in 100-share quantities of the stock, so you have 100 shares covering each option contract that you sell.

2. Select an option month: In the example below for Cummings, CMI, we chose the February 2017 list of options from the pull-down menu on the left. The Bid = the $ amount per option that call buyers are currently bidding for this $140.00 Feb. 2017 option. The Ask = the $ amount per option that call sellers are currently trying to sell this option for. (The Mid is just an average of the Bid & Ask).

Volume = the amount of contracts which have changed hands today.
O.I – Open Interest – the total amount of contracts open for this specific CMI Feb. $140.00 call option:

3. Choose a strike price: We then chose the $140.00 call strike from the list of strike prices for CMI.
Why? Since CMI was trading at $138.06, we wanted to sell at a strike price near the money, (near CMI’s price), but above CMI’s price, so we have the potential for a price gain that’s larger than the dividends we’ll qualify for before the option expiration date.

4. Enter your sell order carefully: We then chose “Sell to Open” from the Action pull-down list on the right. We chose 1 contract for Quantity, “Limit” for order type, $4.70 for our limit price, and “Day” for our timing.

Note: If you want to make sure that your call sale goes through, you can sell at the Bid price. However, since some options have a much wider Bid/Ask price spread than this $4.70/$4.90 spread, you could try to sell for a higher-than-bid price.
Keep an eye on the Bid Size and the Ask Size – these refer to how many bidders and sellers there are for your option. If there are a lot more bidders, you may be able to sell for more than the current bid price.

In this example, we sold 1 CMI Feb. 2017 call option with a strike price of $140.00, which obligates us to sell 100 shares of CMI at $140.00/share, if our shares are assigned, (i.e., sold to a call buyer of that same option, who has exercised his option to buy 100 shares of CMI).
This $140 option expires after the market close on 2/17/2017. Call buyers are bidding $4.70 per option, which equals $470.00, since each option contract equals 100 shares of stock – (100 x $4.70=$470.00).


The next table details the income/profit for each of the 3 main scenarios you’d encounter for this trade. Note: Option profits are usually considered short term capital gains:
A. Static – If CMI doesn’t rise to or above $140.00 at or near the expiration date, your call options will expire worthless, leaving you with $573.00 income from the $1.03 dividend and the $4.70 option premium you received. You’ll also keep the underlying shares, since they didn’t get assigned.
B. Assigned before the ex-dividend date – If CMI rises to or above $140.00 near the ex-dividend date, your shares may get assigned, and you won’t receive the dividend. Always look at the potential price gain, (the difference between the option strike price and the underlying shares’ price), to see if you’ll be amply compensated for any loss of the dividend during the term of the trade.
In the CMI trade, the $140 strike price is $1.94 above CMI’s $138.06 price/share, vs. the $1.03 quarterly dividend you’d qualify for in February 2017.
C. Assigned after the ex-dividend date – If your shares get assigned after the ex-dividend date, you’d collect all 3 income/profit streams – the dividend, the option premium, and the assigned price gain. In this example, that’s quite unlikely, since CMI’s ex-dividend date may be on 2/17/17.


Our free Covered Calls Table gives you more details for this trade, and 25 other income-producing option trades.
Dividends: With its 2.97% dividend yield, CMI barely made it into the Industrials section of our High Dividend Stocks By Sectors Tables. They have a very impressive dividend growth rate of over 40%, and should go ex-dividend on 2/17/17, if they follow last year’s schedule.
Performance: CMI has had a very strong year in 2016, rising over 61% year-to-date. It has also outperformed the market over the past quarter.
Valuations: CMI looks a bit cheaper than broad industry averages on a P/E, Forward P/E, and a Price/Sales basis. However, it does command a higher Price/Book valuation.
Financials: CMI has stronger ROA, ROE, ROI, and Operating Margin figures than industry averages, and an average Debt/Equity load.

Disclaimer: This article was written for informational purposes only, and is not intended as personal investment advice. Please practice due diligence before investing in any investment vehicle mentioned in this article.
Disclosure: Author owned no shares of CMI at the time of this writing.
All tables furnished by, unless otherwise noted. Copyright 2016 DeMar Marketing. All Rights Reserved.

5 Utility Dividend Stocks With Upside Potential

by Robert Hauver

With the S&P 500 finally in positive territory year-to-date, we took a look at what’s been working in 2016. Topping the list is the Utility sector, which has been the go-to sector for income investors, and even non-income investors in this volatile market.

Healthcare, formerly the leading sector for quite a while, has fallen out of favor, thanks to political headline risk due to prescription overpricing by some firms. meanwhile, the Utility sector is up over 12% in 2016, leading all others by a wide margin. Even the resurgent Energy sector, which is up 12% over the past month, trails Utilities by a wide margin:
With all of the strong price performance in the Utility sector, we wondered if there were any dividend stocks left that weren’t already above their consensus analyst price targets. We came up with these 5 stocks…
Click here to read more…

High Dividend Growth Stocks In 2015

by Robert Hauver
Looking for the sweet spot between dividend growth and dividend yield? We parsed the data from S&P 500 dividend stocks through April 30, 2015, to find out which dividend stocks have had strong dividend increases in 2015.
Sector-wise, Consumer Discretionary and Tech S&P 500 stocks had the best combination of overall performance and dividend increases. Even though Healthcare has been the leading sector for ages, it’s not known for having a lot of dividend paying stocks. In addition, this sector’s dividend increases haven’t kept pace with its rising share prices, which has also contributed to a lower overall dividend yield.
We found 3 prospects which had a good combination of dividend yield and dividend increases in 2015.
Click here to read more…

Copyright 2015 DeMar Marketing All Rights Reserved

Homebuilder Dividend Stocks With Hidden High Yields

by Robert Hauver
With all of the recent market volatility and dividend cuts in Energy-related dividend stocks, income investors are looking to other sectors for income stability.
(We maintain High Dividend Stocks By Sectors Tables which feature many high yielding stocks for each sector.)

Although it’s not known for having any high dividend stocks, you may want to consider the Housing industry for some income plays and potential price appreciation.

We’ve found 3 homebuilder stocks which have been beating the S&P 500 over the past week, month and quarter. Two of these three stocks have also outperformed the market over the past year:

Strong Growth Ahead in Housing: Economists are predicting a big rise in household formations in 2015, a key figure for Housing. IHS predicts that 2015 will see the addition of 1.08 million new households, with economic growth driving up the rate of new formation. Single family housing production is expected to rise 26% in 2015. DHI and PHM both get a large part of their revenue from sales in warmer states, where home sales growth is expected to continue to outpace national growth, at a pace of 24%. TOL caters more to the upscale market, and has good exposure to the high end areas of New York City, and Washington, DC.

Dividends: PHM cut its quarterly dividend from 2009 through 2012, and reinstated in August 2013 at $.05. It maintained it at $.05 until December 2014, when it raised it by 60%, to $.08. TOL doesn’t pay a dividend yet, but, as you’ll see further below, it does have attractive options yields.
Covered Calls Options: You can greatly improve upon these quarterly dividends by selling options. These 3 trades all have call premiums which pay much more than PHM’s or DHI’s next quarterly dividends. In fact, the DHI call option pays over 15 times DHI’s next 2 quarterly dividend payouts.

Click here to read more…

Disclaimer: This article was written for informational purposes only. Author not responsible for any errors or omissions.
Disclosure: Author is short put options on DHI, PHM, and TOL.
Copyright: 2015 Demar Marketing All rights reserved

These Undervalued Refining Dividend Stocks Have High Options Yields And More Room To Run

by Robert Hauver
As the price of crude oil has fallen this year, most energy-related stocks have gotten hammered…except for some refining stocks. Why? Because lower crude prices mean lower feedstock costs for refiners, and actually pump up refiners’ profit margins. This fact has not gone unnoticed by the market, which has favored some refiners over other energy-related stocks in recent weeks.
This article covers 2 dividend stocks which are beneficiaries of this turn in fortunes – Marathon Petroleum, (MPC), and Phillips 66, (PSX). While these aren’t high dividend stocks, they do have high options yields, which we’ll cover later on in the article.
MPC has done much better than PSX in all of the following time periods:

However, PSX’s fortunes may be about to change – Goldman Sachs analyst Neil Mehta just added PSX and MPC to his recommended Buy list on 11/18/14, and PSX is up over 3.7% over the last week.
MPC is engaged in refining, transporting, and marketing petroleum products primarily in the US. It operates through 3 segments: Refining & Marketing, Speedway, and Pipeline Transportation.
MPC refines crude oil and other feed stocks at its 7 refineries in the Gulf Coast and Midwest regions of the US; and purchases ethanol and refined products for resale. Its refined products include gasoline, distillates, propane, feed stocks and special products, heavy fuel oil, and asphalt.
MPC also sells transportation fuels and convenience products in the retail market through Speedway convenience stores, and transports crude oil and other feedstocks to its refineries and other locations.
MPC markets its refined products to resellers, consumers, independent retailers, wholesale customers, marathon-branded jobbers, its Speedway convenience stores, airlines, transportation companies, and utility companies, as well as exports its refined products.
As of2/4/14, MPC owned, leased, and had ownership interests in approximately 8,300 miles of pipeline, as well as owned and operated 1,480 convenience stores in 9 states of the United States; and operated 5,200 independently owned retail outlets in the 18 states of the United States.

PSX – PSX Phillips 66 operates as an energy manufacturing and logistics company, operating in 4 segments: Midstream, Chemicals, Refining, Marketing and Specialties.
Refining buys, sells, and refines crude oil and other feedstocks into petroleum products, such as gasolines, distillates, and aviation fuels in the United States, Europe, and Asia.
Marketing and Specialties purchases for resale and markets refined petroleum products comprising gasolines, distillates, and aviation fuels in the United States and Europe. This segment manufactures and sells specialty products, such as petroleum coke, waxes, solvents, and polypropylene.
Midstream transports crude oil and other feedstocks to its refineries and other locations, as well as delivers refined and specialty products, also gathers, processes, transports, and markets natural gas; and transports, fractionates, and markets natural gas liquids in the United States.
Chemicals produces and markets ethylene, propylene, and other olefin products. It also manufactures and markets aromatics products, such as benzene, styrene, paraxylene, and cyclohexane, as well as polystyrene and styrene-butadiene copolymers.

Dividends: Click here to read more…

Disclaimer: This article was written for informational purposes only. Author not responsible for any errors or omissions.
Copyright: 2014 Demar Marketing All rights reserved

The 5 Best Performing High Dividend Stocks In 2014

by Robert Hauver
We thought we’d take a different approach in this article, and look at high dividend stocks within the S&P 500 that are performing well in 2014, vs. those that are oversold and/or undervalued. Not surprisingly, 3 out of 5 of these top dividend stocks are from the Utilities and Healthcare sectors, which are the 2 top sectors year to date.
Performance through 3/17/14: A Financial stock, AIV, is the top performer of this group so far in 2014, but, interestingly, made most of its gains in January and February, and is only up around 2% in March.
Garmin, (GRMN), a tech stock, has made all of its net gains over the past month.
The more defensive Utilities stocks, PEG and AEE, show a more balanced performance, both rising in January and February, in addition to the past trading month.

Dividends: With its 4%-plus yield, we’ve added Public Enterprise Group, (PEG), to the Utilities section our High Dividend Stocks By Sector Tables. You’ll also find Lilly, (LLY), in the Healthcare section of the tables.

Options: 2 of these dividend paying stocks also have fairly high options yields – Garmin and Lilly. We’ve listed July Covered Call trades for both stocks below. Both stocks have ex-dividend dates for their next quarterly dividends, prior to the July call expiration, so you can effectively increase your overall yield substantially, via the combo of the dividend and option yields.
Garmin’s call option payout is nearly 5 times its dividend, and Lilly’s call option pays 4 times its dividend.
You can find more details on these and over 30 other trades in our free Covered Calls Table.
Both trades have call options which are enough above the stock’s share/price, to amply replace the dividend income, via price gains, if your shares get assigned prior to the ex-dividend date.
Here are the major income scenarios for the Garmin trade:
Cash Secured Puts: Our Cash Secured Puts Table also lists July put trades for Garmin and Lilly, (along with over 30 other trades). These put option trades both have strike prices which are below these stocks’ current price/share, thereby achieving a lower breakeven:

Disclosure: Author held no positions as of yet in any of the stocks mentioned in this article at the time of this writing.
Disclaimer: This article was written for informational purposes only. Author not responsible for any errors, omissions, or actions taken by third parties as a result of reading this article.

Buy This New High Dividend Stock Below Par For An 8% Plus Yield

by Robert Hauver
One of our favorite high dividend stocks, Seaspan, (SSW), just issued a new “E” series Preferred stock, which pays 8.25% per annum, via quarterly dividends. We’ve owned SSW and its various preferred shares off and on through the years, and we’ve had very good results with both the common and the preferred.
In particular, SSW’s preferred shares have been a very reliable dividend income source, and they’ve also been pretty resilient to market pullbacks. We list both the new E series preferred, (SSW-E), and SSW in our High Dividend Stocks By Sector Tables Industrials section.
Company Profile: Seaspan provides many of the world’s major shipping lines with outsourcing alternatives to vessel ownership by offering long-term leases on large, modern containerships combined with industry leading ship management services.
Seaspan’s managed fleet consists of 105 containerships, representing a total capacity of over 800,000 TEU, including 32 newbuilding containerships on order scheduled for delivery to Seaspan and third parties by the end of 2016.
Seaspan’s current operating fleet of 71 vessels has an average age of approximately seven years and an average remaining lease period of approximately five years. SSW’s long-term lease business model affords it stable cash flow, with which to pay dividends.

Preferred & Common Dividends:
Buying newly issued preferred shares often offers the retail investor a chance to buy shares below or near the liquidation, par value.
Why is this important? Because, when and if the shares get called in by the issuing company, you’ll also realize a capital gain, if you bought them below the par value. In this case, though, since these shares are cumulative, AND aren’t callable by Seaspan until 2019, so you’ll have ample time, 5 years, to collect around $10.31 in quarterly dividends, and bring your breakeven way below the $25.00 par value.
These shares just started trading on 2/10/14, and are trading right around par. Like many preferred shares, the various websites often show a different ticker symbol for this stock.
The 1st ex-dividend date should be around 4/27/14:
SSW also has a good dividend yield on its common shares:
If you’re interested in more immediate income, there’s an attractive covered calls trade for SSW, which expires in August 2014. The at-the-money, August $22.50 call options are currently paying 2 times the amount of SSW’s next 2 quarterly dividends.
You can see more info on this and over 30 other covered call trades in our free Covered Calls Table.
The $22.50 strike price is also $.38 above SSW’s $22.12 price, so it offers a small capital gain opportunity as well:

We haven’t added any put trades for SSW to our Cash Secured Puts Table as of yet, since its puts aren’t yielding very much currently.
Author: Robert Hauver,copyright 2014 DeMar Marketing, All Rights Reserved.
Disclosure: Author owned shares of SSW and SSW-E at the time of this writing.
Disclaimer: This article was written for informational purposes only. Author not responsible for any errors, omissions, or actions taken by third parties as a result of reading this article.

Dow Dividend Stocks For 2014 – Dividends vs Covered Calls

by Robert Hauver

After the big gains in 2013, (and subsequent declining yields), income investors are scouring the market for safe yields in 2014. With this in mind, we took a look at the 2 highest yielding dividend paying stocks in the DOW 30: AT&T, (T), and its arch rival Verizon, (VZ). In particular, we compared these 2 stocks’ next quarterly dividends to covered call premiums, in order to see if you could increase your yield, while gaining some downside protection.

DIVIDENDS: Both of these stocks are listed in our High Dividend Stocks By Sector Tables, in the Telecoms section. AT&T has a higher dividend yield than Verizon, but Verizon’s 5-year dividend growth rate trumps AT&T’s.
COVERED CALLS: These April 2014 covered call options trades both have strikes above each stock’s price/share, which offers you a chance for some assigned price gains, in addition to increasing the yield above that of the dividends:
Here are the 3 main income scenarios for each trade. You can find more details for these 2 trades and over 30 others in our free Covered Calls Table.
Since VZ’s strike price is further above its share/price, you have more of a chance for potential price gains:

EARNINGS: To be sure, neither of these stocks are growth stocks – here’s how they stack up against each other:
VALUATIONS: The good news is that both stocks look to have more attractive P/E’s in 2014. VZ is commanding a premium over T in its Price/Book and P/E ratios.
FINANCIALS: VZ has used more debt for financing than AT&T has, and has a higher Operating Margin and ROI:
PERFORMANCE: While VZ lagged the market during 2013, AT&T went absolutely nowhere over the past 52 weeks:
Author: Robert Hauver,copyright 2014 DeMar Marketing, All Rights Reserved.
Disclosure: Author had no positions at the time of this writing.
Disclaimer: This article was written for informational purposes only. Author not responsible for any errors, omissions, or actions taken by third parties as a result of reading this article.