Write Puts NLY 126.35% Yield

My puts in NLY expired out of the money over the weekend.

music selection:  “Ride Captain Ride” — Blues Image

weigh-in:  208.6 +1.0

COVID-19 really did a number on my portfolio. If there is a silver lining, it is that high vol is making options premiums really plump. I’m making lots of cash writing puts. Right now, I really like Annaly Capital Management (NLY). There was a great deal of uncertainty that at one point pushed shares down to 3.51. Those who were “greedy when others were fearful” that day made out like bandits.

There is a lot less uncertainty now that management has issued a letter to shareholders. They note strong liquidity, plenty of unencumbered assets, and a book value of 7.40 – 7.60 a share. I consider shares a strong buy up to 7.00. Today, I wrote about 50,000 dollars worth of 6 strike puts. I collected 4,482 in premium income. With the 15MAY2020 puts in force for 26 days, my annualized expected return is 126.35%.

I am actually hopeful to be assigned. Even if the distribution is cut by 25%, the cash payments would be enough to cover my budget shortfall. I would then earn bonus cash by writing out of the money covered calls.

I’m still waiting for SPY to break above its 200-day moving average. Once that happens, I will re-evaluate the contango trade with long VXX puts.

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