March 20, 2020 - MDT Alert (MFA)

Today, I am going to make a suggestion on another high-yielding stock.

This time the stock is MFA Financial Inc.(MFA).

MFA is trading at $4.20 as I write this. And it is trading about $1.30 under the lower band on its daily chart. So, it is oversold.

They have announced a 20 cent dividend payable on April 30th, to the shareholders of record as of March 31st.

Assuming this dividend holds into the future, the annual return would be 19%.

But, my suggestion is to buy the stock and sell April's monthly $5 call against the stock position.

They can be sold for $0.40.

If MFA stays under $5 by March 31st, you will collect the dividend, as well as the call premium.

The best-case scenario is you collect the dividend and the call premium and are assigned at $5.

If that happens, the return for about a month will be 33%.

If MFA trades above $5 by the record date, you may get assigned on the calls, which is not a bad thing, but rather a gift, as you would be selling the stock in two weeks.

If MFA stays under the lower band, I will continue to sell more calls.

Because of the overall market sell off, limit the trade to 1,000 shares or 4.2% of the portfolio.

Legal Disclaimer

There is a very high degree of risk involved in trading. Past results are not indicative of future returns. MadHedgeFundTrader.com and all individuals affiliated with this site assume no responsibilities for your trading and investment results. The indicators, strategies, columns, articles and all other features are for educational purposes only and should not be construed as investment advice. Information for futures trading observations are obtained from sources believed to be reliable, but we do not warrant its completeness or accuracy, or warrant any results from the use of the information. Your use of the trading observations is entirely at your own risk and it is your sole responsibility to evaluate the accuracy, completeness and usefulness of the information. You must assess the risk of any trade with your broker and make your own independent decisions regarding any securities mentioned herein. Affiliates of MadHedgeFundTrader.com may have a position or effect transactions in the securities described herein (or options thereon) and/or otherwise employ trading strategies that may be consistent or inconsistent with the provided strategies.