Dividend Growth Forum

$10k WOW.AX, 13.9x , 5.00% yield (7.14% grossed up including franking credits).

(05-06-2015, 08:31 AM)hendi_alex Wrote: [ -> ]Sold $40 June calls on 100% of HCP (400 shares) for 90 cents. Am ready to cut the shares loose, but the calls probably will not exercise this time as the ticker goes ex. dividend tomorrow. Will continue to sell calls until the shares get taken out. Have decided to focus more on small cap REITs for more growth opportunity. Longer term exposure will be mostly via ROOF (small cap REIT ETF yielding about 5.5%). Also hold CSG, IRT, MPW. Will pick up O at some point under $44. For now O will be the only REIT holding outside of the small cap theme.

I don't know your cost basis on this underlying but why are looking to sell at this level? Looks like a good support level.

It appears you are selling at or near a bottom? Not critiquing, just curious.

I'm overweight in REITs and am overweight in HCP in particular. HCP is no longer part of my investment plan. I tried to get rid of the shares by selling $42.50 calls for $2, but the price dropped. The $42.50's were closed mostly retaining the option income, and now I'm trying to sell the shares via $40 calls. Eventually the shares will get taken out. Until then, they are generating more than 2x the dividend payment.

Selling near the bottom is not a negative when the replacement REITs are selling at similar valuation. What you said about HCP probably applies to most property RETS.

(05-09-2015, 02:09 PM)hendi_alex Wrote: [ -> ]I'm overweight in REITs and am overweight in HCP in particular. HCP is no longer part of my investment plan. I tried to get rid of the shares by selling $42.50 calls for $2, but the price dropped. The $42.50's were closed mostly retaining the option income, and now I'm trying to sell the shares via $40 calls. Eventually the shares will get taken out. Until then, they are generating more than 2x the dividend payment.

Selling near the bottom is not a negative when the replacement REITs are selling at similar valuation. What you said about HCP probably applies to most property RETS.

As you're probably aware, the call premium include the dividends that will be paid throughout the duration of the option, because those payments are known to be taken out of the price. So if HCP is trading at $40, and you sell a call with say a 6 month duration, the option has 2.8% yield (2 dividend payments) built into it. So while you do receive dividend payments, really what is happening is the call option is moving further out of the money. If you want to sell an at-the-money call on price alone, subtract the future dividend payments from the strike price (and collect more risk premium in the process).

Dividends cause no permanent decrease in share price when a company earns its distrution. HCP may remain below $40 through the June expiration, but not because of any dividend payments. In fact on ex date, HCP's share price moved up much more than the dividend amount. Investor sentiment related to short term rates is the only realistic factor to determine whether these calls get exercised.

For this trade, the relevant facts to me are that before expiration/or exercise, I will have received a 56 cents dividend plus a 90 cents contract price (plus 97 cents net from previous call sell). If not exercised I'll go out another 2-3 months, giving me yet another chance to keep the stock, the dividend, and the option income. Hopefully the call sells will more than cover any price weakness. If exercised, the combination of dividends, call contracts, and sell price will provide a net of $42.43 per share.

If exercised, my HCP position will have have generated a meager 13% return over its approximate 18 month holding period. Certainly nothing to brag about. Is one reason that I'm cutting the shares loose.

I respectfully disagree with your first paragraph, but this is a conversation for a new thread (and for when I'm on my computer instead of my smartphone).

(05-09-2015, 02:09 PM)hendi_alex Wrote: [ -> ]I'm overweight in REITs and am overweight in HCP in particular. HCP is no longer part of my investment plan. I tried to get rid of the shares by selling $42.50 calls for $2, but the price dropped. The $42.50's were closed mostly retaining the option income, and now I'm trying to sell the shares via $40 calls. Eventually the shares will get taken out. Until then, they are generating more than 2x the dividend payment.

Selling near the bottom is not a negative when the replacement REITs are selling at similar valuation. What you said about HCP probably applies to most property RETS.

Thanks but I don't understand the last sentence when related back to the first sentence.

If you are overweight REITS, why are you looking to replace HCP?

If you never loved HCP as a long term play, 47 looked like a nice area to take profit?

HCP has already been replaced. I prefer to get rid of HCP via selling calls. My assumption is that call premiuns plus dividends will be higher than any price erosion. Hopefully this strategy will be a little more profitable than a strait out sell, especially if several rounds of calls can be sold. A couple of months ago I decided to move more toward the smaller cap REIT space. Have done that by buying ROOF and a few individual tickers.

---

The last sentence in the responce had nothing to do with the first paragraph. Was addressing your
comment related to selling near the bottom.

+10 UNP

Yesterday, I decided to dump all individual tickers in the REIT space except HCP which is covering $40 calls. The capital was partially redeployed into KBWY.

Today redeployed more back into the REIT space as follows:
KBWY - small/mid REIT ETF
Added 50% this morning @$32.56.

ROOF - micro/small REIT ETF
Added 33% at $26.16.

This adjustment is consistent with my move toward ETF's as vehicle for very diversified exposure to various sectors. Target weighting is about 10% equally split between these two. Would like to eventually include VNQ in the mix, but won't buy until valuations become more reasonable.

Bought 50x HON earlier today. 40 of the shares are for a daily play, just need something fun to do for the evening and will sell them before close. 10 shares are going to stay in the portfolio and are the starting point of my DGI investment into HON.

GIS, HCN, HTA, JNJ, LTC, MO, PEP.