Russia, Russia, Russia
The market hit correction territory last week. And it’s gone nowhere since.
The Russia/Ukraine situation continues to plague stocks. But the crisis really hasn’t dragged the market down much. Sure, it pulled stocks into correction territory, but they didn’t have far to go.
Investors seem to want to believe the situation won’t end up being a big deal, in terms of pulling stocks down. That’s why stocks aren’t down much. But things are fluid and uncertain. Until there is some sort of a resolution to the market’s satisfaction, we will likely continue to see more of the same.
There is some good news in all of this (through the short-sighted prism of Wall Street types). A 0.50% Fed Funds hike in March is probably off the table. Consensus had been moving toward that expectation as the Fed is a million miles behind the curve on inflation. But the consensus now is that the current turmoil will cow the Central Bank into just a 0.25% hike.
For now, the market is volatile and uncertain and unlikely to rally much off the lows. Hopefully, the uncertainty regarding Russia will be resolved before long. That would likely prompt a rally in the near term. Then, investors can get back to worrying about inflation and the Fed.
The market uncertainty makes purchasing stocks at these lower levels a much riskier proposition right now. And the lack of upward momentum is limiting call writing opportunities in general. But there are still pockets that are exceptions.
We purchased container ship company Global Ship Lease (GSL) last week. Shipping rates are high as demand exceeds supply and likely will continue to do so for a while. That stock has been volatile, but it is actually higher since the market got ugly. It should take off when things stabilize.
There is also a new call writing opportunity in a portfolio position in the white-hot energy sector.
Trades Past Month
February 18
OLP February 18 $35 calls at $1.50 – Expired
OKE February 18 $60 calls at $2.75 - Expired
ONEOK, Inc. (OKE) stock - Called
February 23
Sell V Mar 25 $230 calls at $9.00 or better – Remove
Purchased Global Ship Lease, Inc. (GSL) - $24.96
February 25
VLO February 25 $83 calls at $4.20 – Expired
Valero Energy Inc. (VLO) stock – Called
March 2
Sell EPD April 14 $24 calls at $1.10 or better
Trade Alert
Sell EPD April 14 $24 calls at $1.10 or better
Expiration date: April 14
Strike price: $24
Call price: $1.10
Enterprise Product Partners (EPD)
This stock pays a huge distribution yield, but the call premiums aren’t very high because it’s not a big mover. EPD tends to only move with the overall energy sector. And that sector is making a huge move, up 27% YTD while the S&P is about 9% lower. I still like EPD over the course of the year but we have never sold a call on it and it has spiked higher lately. Let’s strike while the stock is strong and near the high and lock in a double-digit income for the year.
Here are the three scenarios.
1. The stock closes above the $24 strike price but near it at expiration
Call premium: $1.10
Dividends: $1.82
Appreciation: $0.79 ($24.00 strike price minus $23.21 purchase price)
Total: $3.71 (total return will be 16% in about 13 months)
2. The stock price closes below but near our $24 strike price.
Call premium: $1.10
Dividends: $1.82
Total: $2.92 (total income of 12.6% in 13 months)
3.The stock price declines.
The decline will be offset by the $2.92 in income.
Stock Portfolio Recap
Enterprise Product Partners (EPD)
Yield 7.8%
After a nice move higher in December and January, EPD pulled back again, along with a consolidation or breather in the energy sector. But it has been on the move again over the past week and it’s up over 6%. It’s a great place to be with a huge and safe yield and a cheap valuation in a strong market for the energy sector. The 52-week high is only about a dollar per share above the current price and I expect EPD to make a run to that high and beyond. (This security generates a K1 form at tax time.) BUY
FS KKR Corp. (FSK)
Yield 11.4%
A cyclical and high-yielding security ran into a tough market after it was added to the portfolio and has held up remarkably well. The stock looks poised to get back to the recent highs of 23 and change per share when the market stabilizes somewhat. The call premiums still aren’t good enough but an opportunity should arise if the stock moves a little bit higher. HOLD
Global Ship Lease, Inc. (GSL)
Yield 5.8%
This newest portfolio addition has been quite volatile in this market. But while it has bounced around a lot, GSL is still a little bit higher since the market peaked on January 4. It looks like a stock that wants to go higher. There are unlikely to be trade disruptions because of the Russian invasion of Ukraine, at least as far as GSL is concerned. Container ships are still in huge demand with very limited supply and the dynamic should last for a while. GSL might take off when the market stabilizes and recovers. BUY
One Liberty Properties, Inc. (OLP)
Yield 6.1%
This industrial REIT has certainly been weak this year as REITs sold off in a big way. OLP is also a more aggressive REIT that has performed well before this year and the market has been unforgiving to such stocks. It recently had a nice bounce but if the downtrend is not broken soon OLP may be sold. HOLD
Qualcomm Corp. (QCOM)
Yield 1.6%
The chip maker stock is still wallowing in Nowheresville. It leveled off after a huge move late last year but still hovered near the recent high. Since the market got ugly QCOM has been dipping lower and then recovering. This is a tough time for technology stocks but QCOM is a standout with huge earnings growth from the 5G rollout and terrific prospects for beyond. It should take off when tech stocks rally again. HOLD
U.S. Bancorp (USB)
Yield 3.2%
This regional bank stock has been very weak since peaking in the middle of January despite the fact that interest rates have been trending higher and the fee business is already strong. There is no good fundamental reason for USB to be lower priced now than it was in the fall. It’s tough to say what the stock will do in the near term, but I expect it to be higher six months from now. It also has some technical support at the current level. HOLD
Visa Inc. (V)
Yield 0.7%
This is one stock that has been a casualty of the Russian-Ukraine invasion so far. The stock had been benefitting from the fact that international business is picking up strongly. But the recent geopolitical turbulence threatens to disrupt the global economy, at least somewhat and temporarily. I expect more volatility and weakness in the near term as the situation continues to unfold. The stock is therefore downgraded to a HOLD for now. But I think V can weather the storm and emerge strong again in the weeks and months ahead. HOLD
Xcel Energy Inc. (XEL)
Yield 2.9%
This smaller alternative energy utility stock had been on a sustained uptrend for several months until it rolled over a couple of weeks ago. Hopefully, XEL can get some traction and start trending higher again in the next several weeks. But XEL was downgraded to a HOLD until it shows more evidence of reversing the recent downside. I love the stock longer term as clean energy should come back into vogue eventually. But I’m watching it closely. HOLD
Existing Call Trades
Sell VLO February 25 $83 calls at $4.20 - Expired
Call premium: $4.20
Dividends: $1.96 (12/9, 3/3)
Appreciation: $9.55 ($83.00 strike price minus $73.45 purchase price)
Total: $15.71 (total return of 21.4% in three months)
The stock had run away but has since pulled back 10% from the recent high. VLO has been weaker despite the rise in oil prices because it is dependent upon the difference between crude and refined product prices, which has been shrinking. The stock has fallen below the strike price since it was called. And we got over 20% in less than three months between the dividends, price appreciation and the call premium. Not a bad trade.
| CIA STOCK PORTFOLIO | |||||||
| Open Recommendations | Ticker Symbol | Entry Date | Entry Price | Recent Price | Buy at or Under Price | Yield | Total Return |
| Enterprise Product Partners | EPD | 3/17/21 | $23.21 | $24.42 | $25.00 | 7.82% | 14.06% |
| U.S. Bancorp | USB | 3/24/21 | $53.47 | $56.54 | $57.00 | 3.21% | 9.03% |
| Qualcomm Inc. | QCOM | 5/5/21 | $134.65 | $171.99 | $140.00 | 1.59% | 29.48% |
| One Liberty Properties | OLP | 7/28/21 | $30.37 | $29.06 | $33.00 | 6.07% | -1.65% |
| Xcel Energy Inc. | XEL | 10/12/21 | $63.00 | $67.33 | $67.00 | 2.90% | 7.61% |
| FS KKR Capital Corp. | FSK | 10/27/21 | $22.01 | $21.70 | $24.00 | 11.35% | 1.63% |
| Visa Inc. | V | 12/22/21 | $217.96 | $216.12 | $225.00 | 0.68% | -0.68% |
| Global Ship Lease, Inc. | GSL | 2/23/22 | $24.96 | $25.80 | $28.00 | 5.81% | 3.37% |
| EXISTING CALL TRADES | |||||||
| Open Recommendations | Ticker Symbol | Intial Action | Entry Date | Entry Price | Recent Price | Sell To Price or better | Total Return |
| EPD Apr 14th $24 call | EPD220414C00023000 | Sell Pending | $1.10 | $1.10 | 4.74% | ||
| as of close on 2/28/2022 | |||||||
| SOLD STOCKS | |||||||
| Security | Ticker Symbol | Action | Entry Date | Entry Price | Sale Date | Sale Price | Total Return |
| Innovative Industrial Props. | IIPR | Called | 6/2/20 | $87.82 | 9/18/20 | $100.00 | 15.08% |
| Qualcomm | QCOM | Called | 6/24/20 | $89.14 | 9/18/20 | $95.00 | 7.30% |
| U.S. Bancorp | USB | Called | 7/22/20 | $36.26 | 9/18/20 | $38 | 3.42% |
| Brookfield Infras. Ptnrs. | BIP | Called | 6/24/20 | $41.92 | 10/16/20 | $45 | 8.49% |
| Starbucks Corp. | SBUX | Called | 8/26/20 | $82.41 | 10/16/20 | $88 | 6.18% |
| Visa Corporation | V | Called | 9/22/20 | $200.56 | 11/20/20 | $200 | 0.00% |
| AbbVie Inc. | ABBV | Called | 6/2/20 | $91.04 | 12/31/20 | $100 | 12.43% |
| Enterprise Prod. Prtnrs. | EPD | Called | 6/24/20 | $18.14 | 1/15/21 | $20 | 15.16% |
| Altria Group | MO | Called | 6/2/20 | $39.66 | 1/15/21 | $40 | 7.31% |
| U.S. Bancorp | USB | Called | 11/25/20 | $44.68 | 1/15/21 | $45 | 1.66% |
| B&G Foods Inc, | BGS | Called | 10/28/20 | $26.79 | 2/19/21 | $28 | 4.42% |
| Valero Energy Inc. | VLO | Called | 8/26/20 | $53.70 | 3/26/21 | $60 | 11.73% |
| Chevron Corp. | CVX | Called | 12/23/20 | $85.69 | 4/1/21 | $96 | 12.95% |
| KKR & Co. | KKR | Called | 3/24/21 | $47.98 | 6/18/21 | $55 | 14.92% |
| Digital Realty Trust | DLR | Called | 1/27/21 | $149.17 | 7/16/21 | $155 | 5.50% |
| NextEra Energy, Inc. | NEE | Called | 2/24/21 | $73.76 | 9/17/21 | $80 | 10.00% |
| Brookfield Infras. Ptnrs. | BIP | Called | 1/13/21 | $50.63 | 10/15/21 | $55 | 11.65% |
| AGNC Investment Corp | AGNC | Sold | 1/13/21 | $15.52 | 1/19/22 | $15 | 5.92% |
| ONEOK, Inc. | OKE | Called | 5/26/21 | $52.51 | 2/18/22 | $60 | 19.62% |
| KKR & Co. | KKR | Sold | 8/25/21 | $64.52 | 2/23/22 | $58 | -9.73% |
| Valero Energy Inc. | VLO | Called | 11/17/21 | $73.45 | 2/25/22 | $83 | 15.53% |
| EXPIRED OPTIONS | |||||||
| Security | In/out money | Sell Date | Sell Price | Exp. Date | $ return | Total % Return | |
| IIPR Jul 17 $95 call | out-of money | 6/3/20 | $3.00 | 7/17/20 | $3.00 | 3.40% | |
| MO Jul 31 $42 call | out-of-money | 6/17/20 | $1.60 | 7/31/20 | $1.60 | 4.03% | |
| ABBV Sep 18 $100 call | out-of-money | 7/15/20 | $4.60 | 9/18/20 | $4.60 | 5.05% | |
| IIPR Sep 18 $100 call | in-the-money | 7/22/20 | $5.00 | 9/18/20 | $5.00 | 5.69% | |
| QCOM Sep 18 $95 call | in-the-money | 6/24/20 | $4.30 | 9/18/20 | $4.30 | 4.82% | |
| USB Sep 18 $37.50 call | in-the-money | 7/22/20 | $2.00 | 9/18/20 | $2.00 | 5.52% | |
| BIP Oct 16 $45 call | in-the-money | 9/2/20 | $1.95 | 10/16/20 | $1.95 | 4.65% | |
| SBUX Oct 16 $87.50 call | in-the-money | 10/16/20 | $3.30 | 10/16/20 | $3.30 | 4.00% | |
| V Nov 20 $200 call | in-the-money | 9/22/20 | $10.00 | 11/20/20 | $10.00 | 4.99% | |
| ABBV Dec 31 $100 call | in-the-money | 11/18/20 | $3.30 | 12/31/20 | $3.30 | 3.62% | |
| EPD Jan 15 $20 call | in-the-money | 11/23/20 | $0.80 | 1/15/21 | $0.80 | 4.41% | |
| MO Jan 15 $40 call | in-the-money | 11/25/20 | $1.90 | 1/15/21 | $1.90 | 4.79% | |
| USB Jan 15 $45 call | in-the-money | 11/25/20 | $2.00 | 1/15/21 | $2.00 | 4.48% | |
| BGS Feb 19 $27.50 call | in-the-money | 12/11/20 | $2.40 | 2/19/21 | $2.40 | 8.96% | |
| VLO Mar 26 $60 call | in-the-money | 2/10/21 | $6.50 | 3/26/21 | $6.50 | 12.10% | |
| CVX Apr 1 $95.50 call | in-the-money | 2/19/21 | $4.30 | 4/1/21 | $4.30 | 5.02% | |
| AGNC Jun 18 $17 call | out-of-money | 4/13/21 | $0.50 | 6/18/21 | $0.50 | 3.21% | |
| KKR Jun 18 $55 call | in-the-money | 4/28/21 | $3.00 | 6/18/21 | $3.00 | 6.25% | |
| USB Jun 16 $57.50 call | out-of-money | 4/28/21 | $2.80 | 6/18/21 | $2.80 | 5.24% | |
| DLR Jul 16 $155 call | in-the-money | 6/16/21 | $8.00 | 7/16/21 | $8.00 | 5.36% | |
| AGNC Aug 20 $17 call | out-of-money | 6/23/21 | $0.50 | 8/20/21 | $0.50 | 3.00% | |
| OKE Aug 20 $57.50 call | out-of-money | 6/23/21 | $3.50 | 8/20/21 | $3.50 | 6.67% | |
| NEE Sep 17 $80 call | in-the-money | 8/11/21 | $3.50 | 9/17/21 | $3.50 | 4.75% | |
| BIP Oct 15 $55 call | in-the-money | 9./01/2021 | $2.00 | 10/15/21 | $2.00 | 3.95% | |
| USB Nov 19 $60 call | out-of-money | 9/24.2021 | $2.30 | 11/19.2021 | $2.30 | 4.30% | |
| OKE Nov 26 $65 call | out-of-money | 10/20/21 | $2.25 | 11/26/21 | $2.25 | 4.28% | |
| KKR Dec 17 $75 call | out-of-money | 10/26/21 | $3.50 | 12/17/21 | $3.50 | 5.42% | |
| QCOM Jan 21 $185 Call | out-of-money | 11/30/21 | $9.65 | 1/21/22 | $9.65 | 7.17% | |
| OLP Feb 18 $35 Call | out-of-money | 11/19/21 | $1.50 | 2/18/22 | $1.50 | 4.94% | |
| OKE Feb 18 $60 Call | in-the-money | 1/5/22 | $2.75 | 2/18/22 | $2.75 | 5.24% | |
| USB Feb 25 $61 call | out-of-money | 1/13/22 | $2.50 | 2/25/22 | $2.50 | 4.68% | |
| VLO Feb 25 $83 call | in-the-money | 1/18/22 | $4.20 | 2/25/22 | $4.20 | 6.13% | |