Bear Put Spread PEP With 138% Yield

This week’s primary trade is in Pepsico (PEP).

music selection:  “I want you (she’s so heavy)” — The Beatles

weigh-in:  217.6 +1.8

The market continues to march steadily higher despite many headwinds. I continue to position myself defensively to take advantage of inevitable volatility pullbacks along the way. My trade this week is in Pepsico (PEP). PEP is a dividend aristocrat and a fully mature company in its cash gushing stage of the life cycle. It’s stock should move slowly. With shares priced at 147.36, I bought the 155/160 strikes bear put spread with 19FEB2021 expiry for 4.15 a share. The trade will be in force for about 54 days. I enjoy 5.18% protection against an upward move in price before my profit is threatened.  Should shares finish below 155, the full profit of 85 cents a share will be earned. Across 9 spreads that would be 765 dollars against 3,375 put at risk or 20%, which is 138% annualized.

Short puts in Annaly (NLY) expire on Thursday. They are safely out of the money as of this writing. Should that continue, I’ll book 444 in profit on the trade before the week is out.  I don’t expect any additional trading action. I’d like to roll VXX but I don’t think it will get into target range before the year ends.

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