I Just Made This High-Yield Trade With Allstate (ALL)

I’m alerting you to a high-yield trade I made with Allstate (ALL) last week — a high-quality dividend growth stock that looks cheap right now.

At the time I made my trade on June 17, Allstate was selling for around $127.20 per share and the January 21, 2022, $125 put options were going for around $8.70 per share.

My trade involved selling one of these puts and there are two probable ways this trade will work out…

Scenario 1: Allstate falls below $125 by January 21, 2022
If ALL falls below $125 by January 21, the option may get exercised. If that happens, I will be obligated to buy 100 shares at $125 per share.

In exchange for this agreement, I was paid an instant $870 (100 shares X $8.70 per share).

This money was immediately deposited into my 401(k) retirement account, where I made the trade.

Taking this income into consideration, my cost-basis would drop to $116.30 per share.

That’s an 8.6% discount to the $127.20 share price that Allstate was selling for at the time I made this trade.

Scenario 2: Allstate stays above $125 by January 21, 2022
If ALL stays above $125 by January 21, the contract expires worthless and I get to keep the $870 in income.

This works out to a 7.0% return on what my purchase obligation would have been ($8.70 / $125) in 218 days.

If I can repeat these results over the period of a year I could generate an 11.7% yield from Allstate without even buying shares. Selling covered options like this is one of my favorite ways to generate “instant income” from high-quality dividend growth stocks.

Greg Patrick

P.S. When it comes to selling puts, I’ve developed a few rules that fit my portfolio objectives. I only sell a put option if:

  1. I want to own the underlying stock anyways
  2. I’ll be buying the stock at a reasonable price (which is typically fair value or better)
  3. The strike price of the option I’m selling is At-The-Money (ATM) or Out-of-The-Money (OTM)
  4. I’m comfortable owning the stock for the long-haul in case the price drops significantly below my strike price
  5. I’m comfortable “letting the stock get away from me” if I don’t get “put” shares and the stock takes off
  6. My position-sizing makes sense if I’m “put” the shares
  7. I can make the trade in a retirement account, such as an IRA or 401(k) to minimize taxes and tax paperwork. 
[stextbox id=”info”]Please keep in mind that these trade alerts are for information purposes only. We’re not registered financial advisors and these aren’t specific trade recommendations for you as an individual. Each of our readers have different financial situations, risk tolerance, goals, time frames, etc. The ideas we publish are simply ideas that we feel fit our specific needs and that we’re personally making in our own portfolios. You should also be aware that some of the trade details (specifically stock prices and options premiums) are certain to change from the time we make our trade to the time you’re alerted about it. So please don’t attempt to make this “High-Yield Trade” yourself without first doing your own due diligence and research.[/stextbox] Nvidia's Secret Partner... This Is The New AI Chip Powerhouse [sponsor]
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