Option Income (TSN)

in money •  last month 

Earn Quick Cash With This Global Food Giant

Buy these types of companies when the market breaks down. The company operates in an industry that investors are attracted to at the moment and business is strong. For income trading we want to see a strong with strong support and limited downside.

Today we can sell puts on the $32 billion packaged-goods leader Tyson Foods (TSN). The great thing about this type of trade is you will earn 2.2% up front for six week exposure even if the stock goes nowhere.

Tyson produces 20% of all chicken, beef, and pork in the U.S. through popular brands including Tyson, Jimmy Dean, Hillshire Farm, and Ball Park. Tyson has also begun to produces alternative protein products like chicken nuggets made with pea protein, bamboo fiber and egg whites. This business is no exciting but they produce attractive returns in all economic environments.

Tyson's business is strong with sales at $41 billion up 14% over the past five years and earnings growing rapidly from $2.67 to $5.83 over the same period. This company can pay shareholders an increasing dividend each year currently yielding 1.7%.

Tyson trades at a good price with an EV/EBITDA of 10.8 compared to 12.9 for S&P 500.

Tyson's stock chart is in a steady uptrend.


Trade details:

Sell to open, the September 20, $85 puts on Tyson for $1.90 using a limit order and earn a 2.2% upfront payment for agreeing to buy shares at a 3% discount to yesterday's closing price.

At expiration if shares are above $85: put sellers will keep the $1.90 for a 22.1% annualized return.

At expiration if shares are below $85: put sellers will buy shares at a 5.4% discount including the premium received. You will then own shares that you can sell covered calls against to earn more income.

For protection use a stop loss at $75.50. You will realized about 9% loss on your cost basis. The uptrend will be broken and it is best to step to the sidelines for other opportunities.

With shares holding up well in this difficult market selling a put today should be an easy check to cash take advantage of it today.

Disclosure: I wrote this article myself, and it expresses my own opinions. I have no business relationship with any company whose stock is mentioned in this article. The information provided should NOT be considered advice. The topics discussed are risky and have the potential to lose a substantial amount. I am not an investment professional and therefore do not offer individual financial advice. Please do your own research before investing.

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