"OGI received an upgrade today.
I sold the $2.50 leap puts for 2023... What?
I'll explain. I got $155 per contract so my naked risk is $95 if the common is put to me.
I took the put premium and put the cash in GGN. Why?
GGN pays a 3 cent per share per quarter dividend there will be 24 dividend payments before expiration. I will collect distributions and reinvest those in GGN each month.
Therefore my risk is approximately 95 cents per share less than the roughly 39 cents collected in GGN distributions (assuming the distribution remains the same for 2022 a not illogical proposition) or net cost of 56 cents per share all in risk. OGI common is $1.63 bid as I write this on an upgrade.
As an aside:
Check the charts
GGN is an oil and gold trust run by GAMCO. When the Iranian General was shot the shares leaped nearly $1 on oil supply concerns 35% quotation rise to over $4.20. The dividend is declared for 2021.
that's my two part real money trade.
Lets see how this goes:
Here are the possiblilties:
I lose money if the company puts the stock to me and the company is unable to sell itself - happens all the time in the penny stock universe. I am not eyes wide shut on this one.
My risk is whatever the shares are worth in a creditor shareholder bankruptcy filing.
If the company goes into bankruptcy likely the shares trade at 25 cents and I lose $35 per contract.
If the stock is above $2.50 and all is rosy I make $1.55.
Lose $35 gain $155.
If there is another gulf oil scare and GGN spikes I will consider it a loan and liquidate the GGN (GGN dropped back immediately after the Iraquis shot a missile into harmless sand in an airforce base and declared victory). I will determine what to do with the OGI at that time.
I'll take my chances.
"Risk is the restless soul of the market." Benoit Mandelbrot quote. I love that one."
Add to that for today That today's Daily Shot showed inflows and capital raise for the industry at $550 million per week. and the thought runs around in my head that importantly US States must raise revenues and this is a viable business source (licensing, oversight, taxation) as well as hurting the unregulated black marketeer. This becomes a double win for cash strapped states.
I sold my GGN this morning at $3.55. I've now collected the monthly dividend twice so the cash from the OGI puts has reduced my cost of the cash secured puts. Therefore this strategy is an opportunity to take advantage of volatility indirectly as well with the cash gained from the sale of the leap put.
All the best.