Option Investor

Option Writer Portfolio - July

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US Bancorp (USB) operates as the holding company for U.S. Bank that provides commercial banking and financial services in the United States. It generates various deposit products, including checking accounts, savings accounts, money market savings, and time certificates of deposit accounts. Berkshire Hathaway is the largest shareholder of the bank. the stock has a 5.7% yield, currently and is one of the more stable banking stocks amid this turmoil. We have had trouble with this stock last month past but have done well with it in the past.

Sector: Financial

Industry: Regional Bank

EPS Date: Estimated on July 15th

We are selling the July 27.5 Puts on USB in hopes that the stock can maintain above the YTD low of 27.86. Should the stock break below that level we will be stopped out of the position regardless of still being above the strike price and the cost basis. One other point to make is the peak put open interest is at the 27.5 strike. That gives that level additional support. Obviously the market is placing some additional risk premium on these puts with the 24% initial return. Therefore this is one of those riskier positions that you might hold off on if you are only able to trade 7 or less. As the chart above shows Stochastics and RSI are nearly oversold and the stock has bounced from its lows of the day. This call is in anticipation of continued strength through the close into tomorrow.

Risk Management for USB
Strike Stop = $ 27.50
Cost Basis Stop = $ 26.65
Technical Stop = $ 27.86

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