Ho Ho Whoa! How about some Christmas cash in that stocking of yours? Well, I’ve got some naked puts for some holiday cheer, and that means using options to generate some extra cash for the magical solstice season! Naked puts are simply an options trade in which you sell the right for another investor to put a stock to you (i.e., force you to buy it) at a strike price selected by you on an expiration date also selected by you.
Expiration dates will actually be for after Christmas, but selling the naked puts now means collecting Santa’s bounty before Dec. 25.
And since I’m suggesting stocks that are great additions to a portfolio, if the stock gets put to you, it’ll be a bonus Christmas present arriving in the new year.
Naked Puts to Sell: Apple (AAPL)
I believe Apple Inc. (NASDAQ:AAPL) will have a very robust holiday season. That is particularly cheerful not only for all you AAPL stock owners, but for those who desire some delicious spiced premiums to drink by selling naked puts against AAPL stock.
With Apple stock closing at $174.54 on Wednesday, you have a numerous choices, but I like the 12 Jan $172.50 naked puts. You can sell them for close to $2.08. That’s a solid premium of 1.2% for a 23-day holding period, which computes to an annualized return of 18%.
However, if you would like to be aggressive, AAPL stock could break out to a new high of $180. The 12 Jan $180 naked puts are selling for $6.35. If AAPL stock does not happen to get assigned to you, you’ll derive a return of 3.5%, which is very large for a 23-day holding period. However, this assumes AAPL stock will keep rising — so should it gets put to you at $180, your effective buy-in price would be $173.65.
Naked Puts to Sell: Disney (DIS)
I think Walt Disney Co (NYSE:DIS) is going to have a mammoth Q4 and Q1 earnings report, thanks to returns for “The Last Jedi.” Today, DIS stock is sitting at $110. The market likes the upcoming merger with part of Twenty-First Century Fox Inc (NASDAQ:FOXA), and I believe it bodes well for much higher prices.
I believe selling the 26 Jan $110 naked puts are the move, since it will be before earnings reports for Q4. This will generate a $2.35 premium, and that translates to a 2.1% return for a 37-day holding period. That translates to a 21% annualized return on DIS stock.
Alternatively, if you think DIS will deliver great earnings and the stock will soar, consider selling the 16 Feb $115 naked puts for $6.40. Again, this is the aggressive move, and will result in a 5.7% return or 57% annualized.
Naked Puts to Sell: Comcast (CMCSA)
I think one might consider selling naked puts for Comcast Corporation (NASDAQ:CMCSA). CMCSA stock enjoys the upside of the cable TV business in that it has lots of cash flow, but also the downside, which is lots of debt. Cable businesses draw down that debt to establish infrastructure, and then produces cash flow from recurring monthly subscriptions.
Comcast is a solid company with quite a bit of likely long-term upside. Thus, the premiums are a bit more modest for those seeking naked puts that are a bit safer.
CMCSA stock trades at $40. The 12 Jan $40 naked puts sell for $1.23. That’s a 3% premium and actually rather generous, and translates to an annualized return of 44%. Considering that CMCSA stock is also in great financial shape, you may want to take on a bit more risk and sell the 16 Feb $40 naked puts for $2, earning a whopping 5% return.
Lawrence Meyers is the CEO of PDL Capital, a specialty lender focusing on consumer finance. As of this writing, he was long DIS. He has 20 years’ experience in the stock market, and has written more than 1,600 articles on investing. He also is the Manager of the forthcoming Liberty Portfolio. Lawrence Meyers can be reached at TheLibertyPortfolio@gmail.com.