VNR covered call

[cwelsh 1,549]

Ok, shares of VNR just dropped below book value, with the declining price of oil, that's probably a little overstated, but still, that's just ridiculous.

 

I just entered a cc on VNR:

 

Buy VNR @ 15.20

STO Jan 17.5 call  0.60

 

Net cost: 14.60

 

If it gets called away, that's close to a 20% gain.  If not, I'm perfectly happy with owning at this price.

[Optrader 128]

Looks interesting. How about selling a cash secured Jan 17  15put  for 1.30 ?

 

You will get more premium collected for same investment and same breakeven and same risk ?

 

They are more of same trade. 

your trade needs to be executed as buy write and needs more comissions than the cash secured put.

also cash secured put can expire worthless and not worry about assignment. 

But the covered call at some point needs another comissions for getting out.

[mirage 0]

VNR is a MONTHLY dividend payer at around 16% at current price. IMHO this favors call write than naked put, as it should offset the extra comission..

However, owning VNR also equates to getting a K-1 at tax season, something that's totally anathema to me.

[Optrader 128]

yeah. I didnt think about it. But yes. I totallly avoid K1.

e.g UNG. Its better to use options on UNG instead of stock to avoid K1

[cwelsh 1,549]

Looks interesting. How about selling a cash secured Jan 17  15put  for 1.30 ?

 

You will get more premium collected for same investment and same breakeven and same risk ?

 

They are more of same trade. 

your trade needs to be executed as buy write and needs more comissions than the cash secured put.

also cash secured put can expire worthless and not worry about assignment. 

But the covered call at some point needs another comissions for getting out.

The cash secured put generates the same return, but I'm actually interested in outright owning VNR long run (so I doubled down on this position today:

 

VNR @13

Sell January 15 call @0.50

net 12.50.

 

As for the K-1's, ive been getting those on MLPs for years, it takes a little more time filling out taxes, but not that much, you just have to fill out more boxes.

[cwelsh 1,549]

I also fully expect that payout to be slashed significantly, even though VNR has some fairly stiff hedging in place

[cwelsh 1,549]

Ok, well you don't often see something down 12.5% then swing to up 12.5% in less than 2 hours, but it happened, so I'm rolling the January 15 call to January 17.5.