Rolled SMCI Options and New T Call

 In recent weeks, there has been a flurry of activity in the options market for Super Micro Computer Inc. (SMCI), with several trades executed around key strike prices. Let's break down these trades and analyze their potential implications.

Trade Summary

1. October 14, 2024: Sold SMCI $44 PUT (November 8) for $188

2. October 15, 2024: Sold SMCI $44 PUT (November 15) for $35

3. October 16, 2024: Sold SMCI $45 PUT (November 22) for $76

4. October 16, 2024: Sold T $23 Call (October 25) for $9

Analysis

1. Consistent Selling of SMCI PUTs: The repeated selling of SMCI PUTs at various strike prices suggests a bullish sentiment towards SMCI. By selling PUTs, investors bet that the stock price will stay above the strike price, allowing them to keep the premium.

2. Rolling of Positions: Rolling positions from higher to lower strike prices indicates a strategy to manage risk and potentially capture additional premium. This can be a prudent move if there is a belief that the stock will not drop significantly but want to stay hedged.

3. Diversification with T Call: Selling a call option on AT&T (T) adds diversification to the portfolio. This trade suggests a neutral to slightly bullish outlook on AT&T, with the expectation that the stock will not rise significantly above the strike price.

 Diversifying with a call option on AT&T  added layer of protection to the portfolio. 

SMCI Options

 Options trading can be a powerful tool for investors looking to enhance portfolio returns and manage risk. Recently, I implemented a strategy by selling PUT options on Super Micro Computer, Inc. (SMCI). In this post, I’ll walk through the rationale behind the trades, the potential outcomes, and how this strategy fits into a broader investment approach.

The Trades:

• 10/10/2024: Sold SMCI $40 PUT expiring on 10/25/2024 for a premium of $81.

Rolled the above call into below call.

• 10/11/2024: Sold SMCI $40.5 PUT expiring on 11/01/2024 for a premium of $55.

Both trades involve collecting premium income while managing the risk of potentially acquiring shares of SMCI at prices lower than their current market value.

This Brought a total $136 in  premiums.

Given the volatility and recent upward movement in the tech sector, Here’s why:

1. High Volatility: Higher volatility in stocks leads to higher option premiums, which translates into more income for PUT sellers.
2. Growth Potential: If I end up being assigned shares at my strike price, I could own SMCI at a discount to current levels, which is attractive considering the company’s long-term growth potential in AI and data infrastructure.

hat’s a PUT Option?

When selling a PUT option, I’m agreeing to potentially buy 100 shares of the underlying stock (SMCI in this case) at a specific price (the strike price) if the stock falls below that price by the expiration date. In return, I collect a premium upfront, which is my income regardless of the outcome.

Breakdown of My Trades:

1. SMCI $40 PUT, expiring 10/25/2024

   • Premium Collected: $81
   • Breakeven Price: $40 (strike price) - $0.81 (premium) = $39.19
   • Outcome: If SMCI stays above $40 by 10/25, I keep the $81, and the option expires worthless. If it falls below $40, I’m obligated to buy 100 shares of SMCI at an effective price of $39.19.

2. SMCI $40.5 PUT, expiring 11/01/2024

• Premium Collected: $55
• Breakeven Price: $40.50 (strike price) - $0.55 (premium) = $39.95
• Outcome: If SMCI stays above $40.50 by 11/01, I keep the $55. If it drops below $40.50, I buy 100 shares at an effective price of $39.95.

otential Scenarios and Outcomes

1. Scenario 1: PUTs Expire Worthless
   In the ideal scenario, SMCI’s stock price stays above $40 and $40.50, and neither PUT is exercised. This means:

   • I keep the total premium of $136 ($81 + $55) as profit.
   • I don’t have to buy any shares, leaving my cash available for future trades.

2. Scenario 2: PUT is Assigned
   If SMCI’s stock falls below $40 or $40.50, I’m obligated to buy 100 shares per contract at the strike prices. Here’s the math:

   • For the $40.50 PUT, my effective purchase price would be $39.95.

   These prices could represent an attractive entry point into SMCI if I believe in the company’s long-term growth prospects, particularly with its positioning in AI and data center markets.

September 2024 Dividend Income Summary

 September 2024 marked another solid month of dividend income, showing strong resilience and growth across various sectors of portfolio. With a total of $3,032.04, this month’s dividends have continued to build on the foundations laid in previous years, although the growth rate has somewhat moderated compared to past years. Below is an analysis of the key contributors, notable performers, and the overall portfolio outlook.

1. Total September 2024 Dividend Income: $3,032.04

The total dividend income for September 2024 reached $3,032.04, continuing the trend of annual growth. This figure represents an 8.29% increase from September 2023’s dividends of $2,799.97. While the growth rate is slightly lower than in previous years, the overall portfolio remains robust, highlighting the benefit of a diversified dividend strategy.

2. Top Dividend Performers

Several stocks have played a significant role in driving the strong results for September 2024:

• Broadcom (AVGO): Leading the charge once again, Broadcom contributed $115.73, up from $98.72 in September 2023. This 17.21% increase continues to demonstrate Broadcom's role as one of the highest dividend contributors in my portfolio, benefiting from strong performance in the semiconductor industry.

• Discover Financial Services (DFS): With dividends of $158.73, Discover Financial has once again been a significant contributor, showing modest growth of 2.66% over last year. While this growth is slower than in previous years, the financial services sector remains a key part of   portfolio.

• Lockheed Martin (LMT): Lockheed Martin provided $121.45 in dividends, an 11.54% increase from 2023. This reflects steady growth driven by its strong defense contracts and solid financial health.

• Chevron (CVX): The energy giant contributed $50.54, an increase of 12.42% from the previous year’s $44.96. Chevron’s reliable performance shows that the energy sector continues to offer substantial returns amid market volatility.

• Johnson & Johnson (JNJ): A stable performer, JNJ’s dividends rose from $64.64 to $69.45, showing 7.43% growth. This steady increase highlights its position as a reliable healthcare stock, especially during times of market uncertainty.

3. Consistent and Reliable Payers

Several companies continued to deliver consistent and reliable dividend payouts:

• Microsoft (MSFT): Microsoft delivered $12.45, up 11.16% from $11.20 in 2023. Microsoft’s consistent growth underscores its ongoing dominance in the technology space and its ability to return value to shareholders.

• PepsiCo (PEP): With dividends of $21.41, PepsiCo showed a 10.36% increase, reflecting the stability of consumer staples in a balanced portfolio.

• Gilead Sciences (GILD): Gilead contributed $40.59, marking a 6.94% increase from 2023. Healthcare continues to be a strong performer, and Gilead’s consistent growth shows it is well-positioned for long-term returns.

• The Southern Company (SO): SO’s dividends grew from $28.58 to $30.57, an 6.97% increase that highlights the reliability of utilities as a steady income source.

4. Dividend Declines and Changes

Although most stocks in the portfolio experienced growth, a few have either reduced or paused dividends:

• 3M (MMM): After a peak of $91.82 in 2023, 3M’s dividends dropped sharply to $44.58 in 2024, a 51.45% decrease. This is due the split in company and  Dividend was CUT

• BHP Group (BBL): BHP’s dividends were notably absent this September, having been moved to October 2024. This shift in the payment schedule is a logistical change and not a dividend cut but does affect the year-on-year comparison.

• SCHD (Schwab U.S. Dividend Equity ETF): SCHD’s dividends dropped from $87.64 in 2023 to $77.36 in 2024, a 11.73% decline. This decrease could be a result of shifts in the ETF’s underlying holdings, reflecting broader market trends.

2024 Dividend Goal: The year-to-date (YTD) dividend of $13,506.24 reflects 69.25% of the $19,500 goal for 2024

6. Conclusion

September 2024 has proven to be another successful month for dividend income, continuing the trend of solid growth. While some stocks like 3M and BHP faced challenges, the overall portfolio performed well, with significant contributions from tech, financials, and energy sectors.

The 8.29% increase in dividends compared to September 2023 highlights the importance of maintaining a diversified dividend portfolio, ensuring that even when certain stocks underperform, others can help drive the overall growth. Looking forward, continued vigilance in monitoring portfolio performance and adapting to market conditions will be essential to sustaining this growth.

My Dividend Income & Reinvestment Update: Woodside Energy (WDS) & BHP Group (BHP)

This week, I’m thrilled to share another update from my dividend investing journey. I received dividends from Woodside Energy Group (WDS) and BHP Group (BHP), with the BHP dividend reinvested to fuel future growth. Let’s dive into the details of these transactions and what they mean for my portfolio.

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Dividends & Fees Breakdown:

• Woodside Energy Group (WDS)

  • Qualified Dividend: $17.25
  • ADR Management Fee: -$0.50
    Woodside Energy continues to provide consistent income, with this week’s dividend of $17.25 marking another steady contribution to my cash flow. Although there was a small ADR fee of -$0.50, this is expected when dealing with ADRs.

• BHP Group (BHP)

  • Reinvestment: 1.8195 shares
  • Price per share: $61.0172
  • Total Reinvestment: -$111.02
  • ADR Management Fee: -$1.13
  • Qualified Dividend Reinvestment: $111
    I also reinvested my BHP dividend, acquiring 1.8195 shares at $61.0172 per share, with a total value of $111. Reinvesting dividends is a critical part of my strategy, allowing for compounding over time. A small ADR management fee of -$1.13 was deducted, but the long-term benefits of this reinvestment outweigh the cost.

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Total Dividends This Week: $17.25

Total Reinvestment in BHP: $111

Even though this week’s total dividend amount is relatively modest, the $111 reinvestment in BHP adds valuable shares to my portfolio, setting the stage for greater future income. Over time, each reinvestment compounds and helps fuel growth.