Today’s trade idea for option traders: Kimco Realty Corp. (trade closed)
Yes, because of COVID-19 it was a bad year for REITs. And Kimco Realty was also suffering from a roughly 28% decline. Of course, with around 400 shopping centers getting shut down and consumers increasingly buying online, it’s would be hard to make money in this business. Nevertheless, Kimco could collect around 90% of its October rent and thus, the revenue was down “just” 8% in the third quarter of 2020. And that was maybe the reason Kimco increased its dividend in the fourth quarter, just after the dividend cut in the third quarter. Of course, Kimco is facing a long recovery process now. It’s not only because of the Corona pandemic but also because of the headwinds from the online shopping which is, of course, a strong competitor of retail REITs. Therefore, long term-investors should be cautious with Kimco, too. But for all option traders who are usually short term oriented, there is an opportunity to sell options and collect a premium. So let’s check it out, folks.
The information I am giving you in this article is for informative purposes only and should not be treated as investment advice. The information presented would not be suitable for investors who are not familiar with exchange traded options. Any readers interested in trading activities related to the information in this article should do their own research and seek advice from a licensed financial adviser.
Type of a trade: Cash secured put (in the money)
Alternatively: Bull put spread
Expiration: 19th February 2021 (44 days)
Premium for 1 option: between $200 and $260 on the day this article was published
Margin: approx. $540 on the day this article was published
Pros for this trade:
– A long signal (I’m using the ADX-Indicator), giving a higher probability that the price will be pushed above the strike in the next x days
– A confirmation of the long signal by the outbreak of the falling wedge (which is considered bullish)
– An extraordinary dividend of around 4.22% in case you get the stock assigned (Source: finviz.com). Please note: the dividend percentage changes permanently because it’s also dependent on the price of the security. Therefore, it’s always a snapshot!
Cons for this trade:
– Low IV Rank of 13% and low IV Percentile of about 16% (Source: Trader Work Station)
– A relatively wide bid-ask spread which makes it more difficult to close the trade for a better price in case it’s not an option for you to get the stock assigned
Result of this trade: You could close the position on 10th February 2021 for about $35 – $40
Realized profit for 1 option: $210 – $215
Days in the trade: 35 (of maximum 44 days)
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