DGI Adventure 11-08-16 Sold Cash Secured Put – Helmerich & Payne, Inc. (HP) – $55.00 strike – Nov 18 Expiration

This trade was actually executed on Wednesday 11/02/16. I didn’t get a chance to write about it until today.

I didn’t go through a full blown investment thesis process for HP because I already did that at the end of August when I first initiated a position. The point of this post is to simply to document the trade.

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

Dividend Cycle

HP goes ex-dividend today, and the distribution is $0.70/share, which is what it was last quarter when they raised it from $0.6875/share.

That may have only been a 2% “token” increase, but at least it was an increase. Increasing their dividend is something the company has done for 44 consecutive years, which…

1) Makes them a dividend champion

and…

2) Is totally mind boggling for a firm so dependent on a volatile commodity like oil.

Obviously this trade will expire before the ex-dividend date, but the premium that I earned was the equivalent of a quarterly dividend distribution, and the contract is only in force for 16 days.

Investment

SPL (Strike Price Logic)

Back in August I explained why I liked the $55 strike. That initial position expired on 10/21/16, and the share price had climbed to the point where I would have had to go to a $60 strike if I wanted to immediately reopen the trade.

I decided to wait, and I’m glad I did. The broader market had a kind of crappy week, and volatility was up while oil was down. That was the perfect combination for someone looking to sell puts on HP. The $55 strikes popped up again, this time with a very short duration, and a very tasty premium.

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