Bear Put Spread In Emerson Electric (EMR) With Yield Up To 249%

Continuing to position defensively.

  • music selection:  “Strings Around My Heart” — 707
  • weigh-in:  214.6 (1.6) – finally making some progress on the ‘quarantine fifteen’

I sold my long dated put in LYFT. I got 22.50 pricing and cleared 1,330 in profit over 428 days. My UBER put is underwater and I’m hoping for a resounding loss on Prop 22 in California on Tuesday to tank shares.

I’m making another defensive play by buying an in the money bear put spread on a Dividend Aristocrat. I suspect Emerson Electric (EMR) needs no introduction. This is a big mature industrial equipment maker that has raised its distribution for 57 consecutive years. Shares are slow-moving and currently priced at 64.79. I bought the 70/72.5 bear put spread with 18DEC2020 expiry (18 spreads). The trade will be in force for about 47 days and enjoys 8.04% protection from a move against me in share price before profit is threatened. I got 1.8933 average pricing so the 1,092 maximum profit would be good for 32% over 47 days or 249% annualized. Big moves like that for an aristocrat are usually only to the downside and I’m protected against that. I think there is a very high probability of earning the maximum profit.

My three other bear put spreads in dividend aristocrats (PEP, CL, DOV) are all well within the money and look money good. I have four bull call spreads for November that are threatened after last week’s price action. I’m going to hold through at least the election to see if they can rally as I haven’t hit any stop losses yet.

Devour your prey raptors.

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