Forgot about this position from last week. I'll share it publically and we'll see how it goes. Some may not regard this as conservative but I have followed the company off and on for decades. Owned them back in the 1990s. The company is Newell Brands. bet you haven't heard of them? I'm betting you have heard of Rubbermaid, Elmer's, Graco, Sharpie, Papermate, Sunbeam, Ball, First Alert, Coleman Outdoors, Yankee Candle, Oster etc. Their business plan since forever is acquiring famous brands that come up for sale. It worked fairly well since forever but they screwed up when they bought Jarden Brands a few years ago. I am an avid fly fisherman, and excuse my French, but they overpaid for a bunch of mostly has been fishing brands that are now commodity Wal-Mart fodder. They can't dump some of this stuff fast enough to get rid of debt. Stock has taken a beating but it is my belief they will survive with their stable of consumer product brands. I may have jumped early but they dropped hard on a bad earning report. They aren't going out of business IMO. We'll see if they right the ship fast enough to save my puts. I believe they will or I wouldn't have sold them. I don't normally sell long options but they clearly need a few quarters to restore any confidence. NWL is an accidental high yielder with a current Div of 5.4%. It's safe for now IMO, though I won't be collecting it soon with puts. It offers some downside protection though IMO. Anyway, well see how wise or foolish my reasoning sounds in a few months. Here are the trades.
Current price is $17.15
JUN Strike 16 puts. $1.12, 20% annualized return
SEP Strike 17 puts, $2.20, 21% annualized return.
Only $3300 worth of capital tied up collecting MM interest for now, minus the $332 in cash already in my account. Doubt I leave these alone until expiration but we'll see. Cash them out if it bounces significantly, or roll them forward and sell more time. I'd like to own NWL longer term but I don't want to be exercised until it is near the true bottom, whenever that is. NWL is at the top end of my risk tolerance range. I would never risk a lot of capital as they are a mistake or two away from a dividend cut. They are going to need to divest a few more brands and not give them away so they can lighten their debt load.
Current price is $17.15
JUN Strike 16 puts. $1.12, 20% annualized return
SEP Strike 17 puts, $2.20, 21% annualized return.
Only $3300 worth of capital tied up collecting MM interest for now, minus the $332 in cash already in my account. Doubt I leave these alone until expiration but we'll see. Cash them out if it bounces significantly, or roll them forward and sell more time. I'd like to own NWL longer term but I don't want to be exercised until it is near the true bottom, whenever that is. NWL is at the top end of my risk tolerance range. I would never risk a lot of capital as they are a mistake or two away from a dividend cut. They are going to need to divest a few more brands and not give them away so they can lighten their debt load.