I wanted to own Ford for the dividend but did not buy it in time for the March payout. So here is what I did. I sold the $9 put in March. If it stays below $9 I will be put the stock in time for the June Dividend. If Ford goes above $9 I keep my $57 in premium per contract. Anyone else like to sell naked puts to acquire a stock?
For sure you already know most of this stuff about Ford below but I'm adding it to educate myself and others.
Ford and the other automakers have been crushed in recent quarters.Concerns over global auto sales growth and rising costs have sent expectations for the group much lower.But Ford has a long-term plan to address these issues and its yield is enormous.
With the stock as cheap as it has been in recent years, we think it is a buy on weakness. While dividend growth isn’t a factor – Ford hasn’t raised its dividend since 2015 – the yield is near 7% and thus, is plenty high enough without the growth factor. That yield is more than good enough to put Ford on the list of high dividend yield stocks, a group of stocks with yields in excess of 5%. We see Ford’s yield – which is as high as it has ever been – as a significant reason why income investors should favor the stock.
As announced in December of 2017, the key points of Ford's plan to turn around its Chinese operation were these:
USD -0.02(-0.23%) Official Close 2/1/2019BTT
So I'm not sure I am clear on what you did. Did you sell the $9 put last March or just recently for March 2019 expiration?
Regardless, I think that you are saying that if Ford is below $9 in March, that you will buy it then(cheaper) and have the June dividend?
At what price below $9 would you break even on the $9 put that you are short?
I guess that would be your risk..........if Ford crashed lower to below $8 which seems unlikely and you collected the time premium to offset the loss from being short but then, if you had just been long for the dividend, you would have had the loss from the price going down WITHOUT collecting the time premium from selling the put.
Makes sense to me.
The other risk is if Ford jumps to $11. You collect the entire $57 for the put that you sold and that buffers the lost profits from price appreciation that you could have had between now and then if you had been long the stock.................but you are buying for the dividend, so that seems like a secondary consideration.
Ford seems to have digested a ton of bad news and its probably, mostly dialed into the price. It is however, still in a downtrend technically, so from that standpoint, it might go lower.
However, for those that see Ford as fundamentally strong, this may be a great place to buy it.
With regards to your plan selling options. I think its pretty smart. I don't trade stocks but have traded futures options in the distant past................selling. The vast majority of futures options expire worthless.
If you are pretty sure about where the price is going, you should have a position in the actual futures. If you don't know but are pretty sure where it's NOT going, then it might be time to consider selling options.
There are all sorts of complicated strategies that traders and farmers use with options to limit their risks.
I remember my Dad telling me, 10 years ago when he bought a bunch of Ford stock at $2. Some of his kids were telling him at 83 years old, he was crazy to be speculating on stocks(he was an industrial engineer for Ford for 40 years and followed them closely).
I think it went down even a bit more and he bought more. He kept saying that there was no chance that Ford would go bankrupt. I'll have to ask him where he sold it at.
Here's a longer time frame on Ford:
I checked on Ford Stock dropping below $2 ten years ago to make sure I'm not getting early dementia:
From that chart, it looks like the super duper support from the August 2012 spike low is at $7.