Perpetual Income Trade Alert: BX, CF, SO, WMB

After a mostly down week on bank fears, recession talk, the Federal Reserve’s rate hike and debt ceiling debate, the market is rallying following a better-than-expected jobs report for April.

We have four positions expiring today, only one of which requires action. However, next week should be a busy one with the chance to roll and add to our positions.

 

Blackstone (BX): 82.25

Blackstone is up nicely after four straight days of trading lower, and our call is on track to expire worthless. We’d like to see another few days of an upward trend before we sell a covered call again. Be on the lookout for a potential alert next week with a new call position.

ACTION: Let the BX 5 May 90 call expire.

 

CF Industries (CF): 69.18

CF Industries turned in a good earnings report with Q1 EPS of $2.85, beating estimates by $0.40, with revenue of $2.01 billion beating by $150 million. Yes, revenue was down 30% year over year, but the fertilizer shortage of 2021/2022 has slowed considerably, and CF was able to manage profits on the sales decline. The company reported $2.33 billion of free cash flow — a good sign heading into the summer.

The stock was up on the earnings news but is down today in sympathy with another fertilizer stock, Mosaic (MOS), which missed on earnings. Our call is on track to expire worthless. We’d like to see CF trade higher over two to three days next week before we sell another one.

ACTION: Let the CF 5 May 79 call expire.

 

Southern Co. (SO): 74.31

Southern Co. stock has run away from us, and our SO 5 May 73 call is in the money. The company goes ex-dividend on Friday, May 12, paying $0.70 per share, but we can’t roll our call out of the money without paying a big debit. At this point, we are better off letting SO stock be called away over the weekend, buying shares next week and selling a covered call right before the ex-dividend date.

ACTION: Allow shares to be called away.

 

ROLL
Williams Companies (WMB): 30.14

We have decided to move on from Williams Companies because of the lack of premium, but we can roll our WMB 5 May 30 call out one week and still pick up a reasonable premium before we exit the stock.

ACTION: Roll the WMB 5 May 30 call to the WMB 12 May 30 call for a net credit of around 0.25.

Buy to close the WMB 5 May 30 call
Sell to open the WMB 12 May 30 call

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