L Brands - Investing In Underwear

Earlier this week I sold two cash secured puts for L Brands Inc. This morning I decided to buy 100 shares and sell a covered call. Retailer stocks have been hit hard this year, especially so the past 30 days. Amazon is kicking everyone's butts. L Brands is suffering too. The company stock is hovering just above its 52-week low at $45.30. This is $2.26 above the 52-week low and $34.37 below its 52-week high.

The puts I sold were at strike prices of $35 and $40. I don't think the stock will fall to these levels and I'd like to own shares. Because of this I bought the 100 shares today at $45.30 and a $1 transaction fee. Total purchase price was $4,531. This new stock will increase my annual dividends by $240. This will take me above my 2017 goal of $7,500 in annual dividends. L Brands usually pays an annual special dividend either in Q1 or Q4. The company hasn't paid this dividend yet this year. I'm hopeful that a special dividend is paid in Q4. This will just be more whipped cream on top of my dividend sundae.

The chart below shows these special dividends. from 2010 to 2016 L Brands has paid this dividend every year with exception to 2012. Lbrands dividend history 2010 to 2016

L Brands special dividend amounts over these years has been the following:

  • 2010 - $3.00
  • 2001 - $3.00
  • 2012 - $4.00
  • 2013 - $0.00
  • 2014 - $1.00
  • 2015 - $2.00
  • 2016 - $2.00

L Brands Covered Call

I bought the 100 shares and immediately sold a covered call. There's decent premiums on both sides of the options market for this stock, which is why I decided to buy shares and sell this covered call. The details of my covered call are as follows:

  • Contract Length: 127 Days
  • Expiration Date: 11/17/2017
  • Opening Fees :$1.10
  • Strike Price: $50.00
  • Premium: $1.80
  • Potential ROR: 10.28%
  • Potential Profit: $178.90

Lbrands Covered Call

Combining my premiums from the two puts I sold earlier in the week, I've made $387.70 in premiums. If I let these expire, my per share cost basis of L Brands stock is $41.43. I've updated my options tracker to account for this last covered call. I now have 15 open contracts, representing potential revenue of $4,437.

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