Opening a buy/write in Dolby (DLB)

music selection: “Like The Way I Do” — Melissa Etheridge

weigh-in:  200.0 +1.8 – doh!  Way too much Super Bowl eating

Dolby (DLB) got started reducing the hiss created on music playback. Today, they are a technology powerhouse with 9,300 patents and 4,100 more pending. The company is leading in augmented and virtual reality, advanced video and compression, and other technologies. It earns a steep 89% gross margin. And trades for a mere 25 P/E despite high single-digit sales growth. The company is stable and has a great future. It holds zero debt and is a dividend grower. I’m doing a buy/write trade today to establish a covered call for income.

I opened my position this morning with the purchase of 100 shares of DLB at 44.88. I further sold a covered call against the position. I sold DLB190215C00065000 for 88 cents a share. The trade will be in force for 12 days and yields an expected 30.49% on an annualized basis. Should shares be called away (and it is likely), I will earn an additional 12 cents in short term capital gains bringing the annualized yield up to 46.88%. If I keep shares, I will write additional calls for more income while waiting on the underlying distribution of 1.17%.  And that yield has been steadily growing. I feel very good about my prospects here.

Devour your prey raptors!