New Put Option Guidelines
The MYFR team has decided to change some of our investing strategy. There are a couple of important reasons. First, the market is down a lot over the last year. Second, we have been migrating away from real estate to the Dividend Champions we own in our asset management businesses. Third, as risky as the market is with inflation and recession risks it seems riskier in the rest of the world, and we expect a flight to safety in great Ame,rican businesses. We expect to have a cash inflow from recent real estate sales so with the increased liquidity we feel a bit more aggressive in our put option sales.
We will wait to implement these guidelines until later in the week of 1/16/2023 because we expect market disruption once the debate on raising the national debt limit starts. The following are the new guidelines. Each item in this checklist of guidelines should be true before selling any put options:
1. Sell puts only on days when the Dow is down 500 points on two consecutive days. (Previously that was 700 points.)
2. Sell puts on Dividend Champions that are down at least 2%.
3. Strike price should be at least 15% below the current price.
4. Expirations should be no longer than three months.
5. Maximum potential margin risk no more than 10% of equity.
6. Sell up to two put contracts on any Dividend Champion. (Previously that was one contract.)
7. No put selling for Dividend Champions where we already have significant positions like ALB, NUE and MMM.
8. If selling more puts on positions we already own, focus on the stocks that have done well (in the green in regards to percent gain) as opposed to ones that have not done as well (in the red in regards to percent gain).