DGI Adventure 10-20-16 Sold Cash Secured Put – Starbucks Corporation (SBUX) – $50.50 strike – Nov 11 Expiration

This trade was actually executed on Thursday 10/13/16. I didn’t get a chance to write about it until today.

This post won’t exactly be following the core philosophies article on my investment thesis process. I went through all that when I first initiated a position back in June.

I tried again in July to no avail, and then ended up waiting awhile for before another good put writing opportunity presented itself.

I have updated the portfolio and income tracker back at the mothership to reflect this position.

Dividend Cycle

In years past the November ex-div date was as late as 11/16, but last year it was 11/9, and in 2014 it was 11/10. So who knows for sure when the ex-div date will hit. Early to mid November is a reasonable expectation.

The company is due to announce an increase, as the distribution has been stuck at $0.20/share for the last four quarters. Thanks to its 6 consecutive years of increases, Starbucks is a dividend challenger, and I see no reason for that trend to stop any time soon.

It’s hard to say if this contract will expire before or after the ex-div date. Obviously I’m hoping for before in case I get assigned, so I can get a quick dividend payout on top of this sweet option premium.

If that doesn’t work out, though, I won’t be heartbroken. The premium is over 3X the dividend distribution.

Investment

SPL (Strike Price Logic)

Not a whole lot to talk about here is there? Previously I was happy to sell puts with strike prices of $52.50 and $53.50, so $50.50 is a no brainer, especially in light of very decent downside protection and a healthy annualized return on the premium.

My yield on cost if assigned at the $50.50 strike price will be ~1.6% which is well above the 5 year average yield of 1.2%.

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