Two days ago in a retiree's taxable account I entered into the following trade:
02/09/2012 STO 3 PEP Apr 21 2012 60 Puts @.54 149.71
I entered into this trade when PEP had tanked down to 64 after it's quarterly report. As stated in my prior post, it has been my experience that when blue chip Dividend Champions release a quarterly report which disappoints it may tank briefly before rising to it's prior price. These were written well below the tank and if put to us the yield on cost will be 3.46% with a dividend rise expected in June. If these puts expire worthless we will earn 5.34% in 73 days on $2800 of margin maintenance which equates to 26.7% annual. If the stock tanks all the way to 60 or below I am confident we can roll the position for a credit.
Good trading
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