DGI Adventure 10-27-16 Sold Cash Secured Put + Cisco Systems, Inc. (CSCO) – $29.00 strike – Nov 18 Expiration

This trade was actually executed yesterday 10/26/16.

I went through my investment thesis process for CSCO when I first initiated a position back in June, so this post will just be to record the trade.

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

Dividend Cycle

CSCO went ex-div earlier this month on 10/03/16, so that won’t be an issue again until the first part of next year. The distribution has been at $0.26/share for the past three quarters, so I would expect it to remain there for at least one more quarter. After that, though, it should continue to climb. The company is a dividend challenger with six years of consecutive dividend increases, and I see no reason why that won’t soon become seven.

This option will expire before the next ex-dividend date, and exceeds the quarterly distribution.

Investment

SPL (Strike Price Logic)

My first position in CSCO was a put that I sold on Brexit day. I got a great premium with decent downside protection for a $27 strike price. The share price completely took off from there:

CSCO 6 Month Chart – Courtesy Yahoo finance

As you can see there haven’t been too many big moves down since then. I kept an eye on the stock price, but for some reason I didn’t pull the trigger on any more options trades. In hindsight, there were probably some good opportunities, but I guess I got spoiled with that first strike price being so low. I was looking for another chance to get a sub-$30 strike again. With the recent volatility this month, the share price finally came back into range, although it’s only $29 this time.

I like CSCO with as low as a 3% yield, which technically means shares are “fairly” priced up to $34.67 with the current dividend. So $29 is pretty damn good. I probably shouldn’t be so picky in the future.

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