Covered Calls on Waste Management (WM)
Waste Management (WM) falls into the Peter Lynch stalwart category. Its growth is a pretty consistent at 7% to 8%, and has near-legendary status for its name brand in the garbage business. It has managed to stay atop the business even as gas prices have increased, and competitors have entered the market. It increases its 3.6% dividend regularly, and pays out most of its free cash flow as that dividend. So it’s a nice hold for a retirement portfolio.
Consequently, I chose this as the most conservative option as a result.
WM stock is at $41.93. The May 42 Calls go for 80 cents, so it’s a modest 1.9% return for a seven-week holding period.
Sell two of these contracts for $160, and … well, at $1,064, it’s not a perfectly round number, but no one’s complaining.
As of this writing, Lawrence Meyers did not hold a position in any of the aforementioned securities. He is president of PDL Broker, Inc., which brokers financing, strategic investments and distressed asset purchases between private equity firms and businesses. He also has written two books and blogs about public policy, journalistic integrity, popular culture, and world affairs. Contact him at firstname.lastname@example.org and follow his tweets @ichabodscranium.