Thursday, 10 September 2015

New Purchase - Royal Dutch Shell // Options Trade - OHI

On September 4, 2015, I added some shares of RDS.B.


Number of shares purchased
20
Price per share
$49.54
Commission
$9.95
Total cost per share
$50.04
Total cost
$1,000.75
Annual dividend per share
$3.76
Initial dividend yield
7.5%
Increase in forward 12-month dividends
$75.20




Because of low oil prices, Baytex Energy recently eliminated its dividend. This has reduced my yearly dividends, which now stand at $9,159.

On September 10, I sold a put in OHI. The trade:


Sold 1 OHI Put Mar 18 '16 $35 Put @ 4.60 ($11.20 commission + $0.01 SEC Fee)


Days Held (sell date to expiry): 190


Net Premium: $448.79


Annualized Return = ($448.78 / ($3,500 - $448.79)) * 365/190 = 28.3%

The most likely outcomes of this trade are:

1. Shares are trading above $35.00 at expiration. I will get to keep $448.79 in net premiums.

2. OHI is trading below $35.00 at or before expiration and shares are assigned. I will receive 100 shares of OHI at a net cost of $30.51/share.

6 comments:

  1. Nice trade here. I like RDS but I am worried about the future dividends. I doubt they will eliminate it completely but still. What are your thoughts on their dividends near term?

    ReplyDelete
    Replies
    1. I think if oil stays at $40 for a long time, many oil and gas companies will eventually cut their dividend. No one knows where the price is going. One things for sure, there is one winner in each trade. Sometimes it's the buyer, sometimes it's the seller.

      Delete
  2. Are you keeping companies that cut their dividends?
    thanks

    ReplyDelete
    Replies
    1. The short answer is yes. I know that most retail investors sell their shares in a company that cuts its dividend. I believe that Ensco's and Baytex's dividend will eventually get back to where it was once oil prices increase.

      Delete
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    ReplyDelete