Options Trade - Kinder Morgan, Inc. (KMI)

It's no secret that KMI is on the radar of a lot of DG investors.  I added shares this week and prices of KMI are still retracting.  Instead of going too much overweight right away, I've decided to sell some puts.  I haven't had a lot of options activity the last couple of months but expect to pick it up in order to get better prices on shares.

Here's the trades:

I sold 1 KMI June 21 '14 $32.50 Put @ 2.40

I simultaneously sold 2 KMI Jan 17 '15 $27.50 Puts @ $1.6

KMI has projected a payout of $1.72/share next year, that's an average of $0.43/quarter.  The cost basis on the first trade would be $30.10/share and the cost basis on the longer dated put would be $25.90/share.  At $0.43/quarter then the yields on cost (YOC) on these shares if assigned are 5.7% and 6.6% respectively!  These are huge yields and I don't see KMI having any problems paying out their projected amounts.

If all 300 of these shares are assigned, this would double my position to 600 shares and reduce my total cost basis from $34.63 to $30.97 or a reduced cost basis of 10.6%.  

This trade could turn out a few ways:

1) I hold shares until expiration and shares are trading above the strike.  I will get to keep the $560 in options premiums.

2) I hold shares until expiration and shares are trading below the strike.  I will get assigned 100 shares of KMI in June and another 200 shares next January.  I mentioned above the outcome if this happens.

3) Shares of KMI go on a run and I decide to buy back the put early for a profit less than $560.

I currently have 10 open options positions and a total options profit of $4149 for 2013.  My options page has been updated accordingly.