Trades – Safeway Inc (SWY) Put

Safeway-LogoThe morning of February 11, 2013, I sold one put contract for Safeway, Inc. (SWY). As a dividend challenger, my expectation is that SWY will continue to maintain or increase their payout, and have the room to do so. Safeway currently has a payout ratio of less than 40%. With a quarterly dividend of $0.175, yielding 3.47%, they are a good candidate to continue to pay dividends while affording me the opportunity to make some options trades.

With an expiration date of March 16, 2013, I sold a $19 put for $0.57 per share, resulting in a net premium of $51.35 with total trading costs of $5.65.

With this trade, my possible outcomes will be:

SWY trades for less than $19: I will be assigned the stock and will keep the option premium. Based on this outcome, I will have a net cost basis of $18.49 per share, giving me a yield on cost of 3.79%.

SWY trades for more than $19: I will keep the option premium, and probably immediately sell another put. Given a 33 day window on the option, repeating this transaction for the entire year would have net me a whopping 29.7% return.

Keep track of all my trades under the Investments and Trades pages.

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