Option Selling Ideas For Income

Summary

  • There are a few cash-secured puts that look like could be attractive as earnings are reported.
  • In general, I think folks can sell January covered calls near the money on about 2/3 of holdings in positions.
  • Ask questions about specific ideas in comments or chat. Give details of your situation including asset allocation and cost basis.

Early each week I give a few option selling ideas, primarily cash-secured puts. Please use the comments and MoSI Retirement Income chat to ask questions. Be as specific as possible on your asset allocation, cost basis and other financial circumstances.

Cash-Secured Put Ideas

Freeport-McMoran (FCXearnings are Oct 22. Consensus is for 26¢ per share. At current prices that implies the stock is roughly fairly valued based on average expectations.

I expect the next few years to be very good for Freeport as demand for metals increases. Because I don’t like hte market in general right now, I am not inclined to buy calls. However, I am selling cash-secured puts. The average move after earnings is about 5%.

I’m entering GTC limits to sell FCX December $16 puts for a $2 on the idea that there is no stimulus and earnings don’t excite just yet. I might reduce the premium depending on stimulus and earnings.

SunPower (SPWR) earnings are October 28th. It is one of my long-term favorites, but there is lack of clarity on short-term outlook. With the election coming up and Biden looking like a landslide winner, I am inclined to use any dip to buy shares and sell cash secured puts.

Analysts are bullish on earnings, giving upward revisions, which is usually a good sign. However, most are ranking SunPower a hold mainly due to the stock’s rally. Consensus price target is around $13.

I’m looking to sell December $15 puts where this is first level support for $3 to try to get a net cost basis of $12 which is strong support. SPWR December $15 GTC Sell for $3. 

Ford (F) earnings are October 28th. It is another of my long-term favorites. The stock has been gaining some traction and at some point soon the EV/hybrid future of Ford will be announced.

I think the stock will be volatile, but I think a starter (1/2% or 1%) to full position (3-4%) is a must right now.

I’m not sure when, or if, a “Ford will be 100% EV and hybrid by 2025” comes, but all signs point to it coming. We’ve seen how much Millennials can move stocks they love. Ask Tesla. 

Sell January $7 cash-secured puts market to at the ask.

Covered Calls 

All of the stocks with RSI around 70 and near 52-week highs are covered call candidates. I’d be looking at December and January expirations near or slightly out of the money. Covered calls across 1/3 to 2/3 of positions can make sense depending on your asset allocation and cost basis. 

Here are some growth stocks to consider selling covered calls on and/or take some profits by selling some stock. 

Here are some dividend stocks to consider selling covered calls and/or take some profits by selling some stock. The dividend stocks are really bid up in my opinion and many have relatively low capital gains potential in coming years from these prices. 

Final Word

Remember, asset allocation rules. Overvalued and overbought is very dangerous. Scale in, scale out, a piece at a time as it gives you cover from having to be perfect. 

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