I pulled the trigger on 100 shares of CSX Railroad @ 19.50/share today. This will compliment my NSC stock I already own.
I also simultaneously sold an Aug 17 $20 CSX Put @ 2.00.
This trade can play out two ways if I wait until Aug 17:
A) The put gets assigned and I'll own an additional 100 shares of CSX @ $18/share. My total 200 shares of CSX will have an average cost of $18.75/share before commissions. At $18.75/share, which is a price below their current 52-week low, CSX would yield right at 3%.
B) The Put expires worthless, I collect $200, basically reducing my entry cost of CSX to 17.50/share.
These 100 shares will pay me an additional $56/year.
CSX has a TTM P/E of 11.01, 2.87% yield, P/B of 2.25, payout ratio of 28.86%, They are a dividend challenger having increased their dividend for 8 straight years, and have a 5-year CAGR of 32.3%.
Looks good. I'm vaguely familiar with CSX from reading about NSC. I'll have to take a more in depth look at the company. I wouldn't mind adding another railroad and the CAGR is just fantastic!
ReplyDeleteI like the options approach you're taking here. Hopefully you'll post about your options experiences in 2013. I'd be interested in reading how it's doing.
Thanks for dropping by. I plan on doing an options yearly recap soon. I will stick to my strategy of using options to lower my cost basis on stocks I want to own anyways and keep posting updates when I make trades. Maybe my trades will encourage others to start trading options. I know I am feeling a lot more comfortable with them now.
DeleteI like your strategy - I had never thought of using naked puts in such a way. CSX was added to my watch list earlier this year and would be a nice addition to my NSC. It's earnings growth over the last 10 years is in line with NSC's, and much better than CNI and UNP.
ReplyDeleteThanks for stopping by and I am glad you like my strategy. So far it is working well. I think we may have a good opportunity this week to make some buys with the fiscal cliff negotiations. Take care!
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