The Money Tree

Safely Generating Income in Retirement

Portfolio Update – GTY / HGT

Posted by mounddweller on July 16, 2011

Fellow Traders,

I want to update you on a couple of my open trades.  Both of these trades employ a different strategy than either my Deep OTM NP or regular NP/CC trades.  This strategy involves buying high yield stocks and selling CCs against the shares in addition to collecting the monthly or quarterly dividends.

First let’s look at Getty Realty Corp. (GTY).  Getty is a real estate investment trust which owns gas stations on the east coast which they lease to independent operators.  Getty first caught my attention back in March of this year when they had a significant drop in price.  I felt the situation causing the price drop would resolve itself and the stock would subsequently rebound.  I opened the trade by selling NPs.  Since that time I have collected two quarters of dividends and sold two rounds of CCs.  My complete transaction history is below.

In the 4 months I have been holding GTY I have collected $1,680 in premiums and dividends.   With $11,250 in capital at risk that’s a 14.93% return in only 4 months!  Annualized that’s approximately a 45% ROIC.  Not bad for a REIT, huh?  Note this return doesn’t include my substantial unrealized capital gains.

Next up is Hugoton Royalty Trust.  As many of my long-term readers know I have been trading HGT for about 15 months.  I’m on my third round of trading HGT.  In both of the 2 prior rounds my shares were called away when my CCs finished ITM.  Below is the transaction history for my third round of trading in HGT.

In 4 1/2 months in holding HGT I have collected $636.56 in premiums and dividends.  That’s a 5.92% ROIC.  This will only get better as I should receive one more dividend in August prior to the expiration of my covered calls.  My goal in this trade is to achieve a total return of 12-15% annually.

Regards,

Troy

 

2 Responses to “Portfolio Update – GTY / HGT”

  1. Dieter Kolberg said

    Hi Troy,
    I am just wondering why you are not selling puts on HGT
    Thanks
    Dieter

    • mounddweller said

      Dieter,

      I have considered selling puts on HGT. However, thus far I haven’t figured out a good, safe way to incorporate them into my overall HGT strategy. HGT puts have two strikes against them right off the bat…

      (1) they are thinly traded, thus bid/ask spreads can be very wide
      (2) they trade in $2.50 increments which makes them hard to work with when the underlying trades in a fairly tight range.

      I would like to buy more HGT at $20 or less. Thus, if and when HGT slips to $21 or less I’ll begin looking at the $20 puts. I’m open to ideas if you see something you think I might be missing please pass it along.

      Regards,
      Troy

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