http://finance.yahoo.com/news/heres-why-utilities-buy-now-200208164.html
Well...I wouldn't call utilities a buy right now. While fundamentals are certainly favorable, everyone already knows this and utilities have been bid up:
http://finance.yahoo.com/echarts?s=XLU+Interactive#{"range":"2y","allowChartStacking":true}
At 46.57 it's already a bit late to buy XLU. I should have bought at 40, or lower.
Lets say I'm willing to buy at $40:
Trade
With XLU at 46.57
Jan '17 40/35 bull put spread for a net credit of $50
Yield = 50/450 = 11.1% in 349 days or 11.6% annualized
Prob = 80%
Expectation = .8(50) - .05(450) - .15(225) = 40 - 22.5 - 33.75 = -16.25
Price.............. Profit / Loss.......... ROM %
26.25................. (450.00)........... -88.90%
32.38................. (450.00)........... -88.90%
35.00................. (450.00)........... -88.90%
38.84.................. (65.90)............ -13.18%
39.50..................... 0.00................ 0.00%
40.00.................... 50.00.............. 11.10%
45.30.................... 50.00.............. 11.10%
51.76.................... 50.00.............. 11.10%
58.21.................... 50.00.............. 11.10%
11.6% annualized is a little below what I usually try to get in these trades. I would be happier with something north of 15%. The closing bid on Friday for this spread was $48. Ten year treasuries are currently yielding 2%
http://www.bankrate.com/rates/interest-rates/treasury.aspx
TLT is paying 2.48%
VWESX pays 4.38%
XLU itself pays 3.5%
OptionsXpress seems to think I can get $75 for the trade which would be an annualized 18%. On Monday AM I will try some fishing to see if something closer to the $75 can actually be filled.
Well...I wouldn't call utilities a buy right now. While fundamentals are certainly favorable, everyone already knows this and utilities have been bid up:
http://finance.yahoo.com/echarts?s=XLU+Interactive#{"range":"2y","allowChartStacking":true}
At 46.57 it's already a bit late to buy XLU. I should have bought at 40, or lower.
Lets say I'm willing to buy at $40:
Trade
With XLU at 46.57
Jan '17 40/35 bull put spread for a net credit of $50
Yield = 50/450 = 11.1% in 349 days or 11.6% annualized
Prob = 80%
Expectation = .8(50) - .05(450) - .15(225) = 40 - 22.5 - 33.75 = -16.25
Price.............. Profit / Loss.......... ROM %
26.25................. (450.00)........... -88.90%
32.38................. (450.00)........... -88.90%
35.00................. (450.00)........... -88.90%
38.84.................. (65.90)............ -13.18%
39.50..................... 0.00................ 0.00%
40.00.................... 50.00.............. 11.10%
45.30.................... 50.00.............. 11.10%
51.76.................... 50.00.............. 11.10%
58.21.................... 50.00.............. 11.10%
11.6% annualized is a little below what I usually try to get in these trades. I would be happier with something north of 15%. The closing bid on Friday for this spread was $48. Ten year treasuries are currently yielding 2%
http://www.bankrate.com/rates/interest-rates/treasury.aspx
TLT is paying 2.48%
VWESX pays 4.38%
XLU itself pays 3.5%
OptionsXpress seems to think I can get $75 for the trade which would be an annualized 18%. On Monday AM I will try some fishing to see if something closer to the $75 can actually be filled.
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