New Year – New Strategy

I don’t know about you – but I have a habit of overthinking things.  Especially when it comes to making investments – and 2017 was a case study for me.

Based on my Rebalancing Portfolio Rules, I lightened up on stock as the markets kept going higher and higher.

Also, based on the rules for my Preferred Options Strategies, I was not making any options trades for income.

So I basically did nothing to adjust for lower equity holdings and my 2017 performance suffered.  My 8.14% return was well above my 5% annual target – but trailed the S&P 500 by over 11%!  When you look at my long-term average (the past 16 years), I have beaten the S&P 500 by almost 5% annually – so I am not giving up and buying index funds anytime soon, but I feel a recalibration to my options rules is in order.

I will be casting a wider net for options income opportunities in 2018 – starting today.  I reviewed all my screens and came up with 4 trade candidates:

I feel each stock offers a compelling opportunity to buy into a solid company experiencing short term negative volatility.  I pulled the trigger on the first trade of 2018 today – selling puts on FirstEnergy:

• Sold: 10 February 16, 2018 Puts
• Strike Price: $29.00
• *Premium Collected: $500.00

FirstEnergy is Morningstar’s top pick in the Utility Sector, as the firm trades at an almost 25% discount to their $40 fair value estimate – so who am I to argue.

If I am forced to buy the 1000 shares, my entry price will be $28.50 per share – almost a 29% discount.  FirstEnergy is currently paying a 4.8% dividend – so I feel comfortable holding this company if I am forced to buy.

Note: If you want to see an ugly chart – pull up FirstEnergy – this is not a trade for the squeamish.

*Excludes transaction costs.