Blake Young found a trade that pays 2.76% in one month. Annualize that…and you’ve got a VERY healthy return.
Dow (the chemical company) would have to drop 7.5% before he loses a single penny.
If Dow does fall that far, Blake owns it at a discount. Then he starts collecting a 4.9% dividend yield.
That setup comes out of a market going nowhere. The S&P 500 and the QQQ both gapped down today, filled the gap, and closed right back at yesterday’s level.
Blake doesn’t read that as bullish or bearish. He isn’t convinced we break out over the next couple of days or weeks.
He went hunting for the next inflection point instead. He found it in basic materials.
Materials should normally benefit from higher costs and higher inflation. The XLB has dropped back to long term support anyway.
Blake’s one year chart shows that level holding again and again. It lines up with the old resistance from the very beginning of the year.
He sees two paths from here. A bounce toward 54 or 55 would be a 10% move higher. A break would be a 10% drop.
Blake doesn’t want to risk 10% to catch the bounce. He’d rather sell puts on stocks inside the sector that can also pay him a dividend.
Tonight’s video walks through the exact setups:
- Dow sits on a support reversal almost identical to the XLB chart. The 27 put with a 30 delta pays 2.76% over one month with a 7.5% safety net.
- Assignment on Dow means owning the stock at least 2.7% below today’s price with a 4.9% dividend yield. Blake puts the put income at the equivalent of 30% a year.
- CF Industries pays 2.8% on the 113 put right now. The breakeven sits near 109.90, a 7.15% safety net even if assigned.
- Blake would rather wait for CF to pull back toward 112, possibly testing its 200 day moving average. That same trade would sit about $6 lower with a yield near 2.5%.
Blake closes the session with a third name, Rio Tinto.
If materials bounce, Blake keeps the premium. If they break, he owns a dividend stock at a discount he chose ahead of time.
