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Dogs of the Dow Update

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Earlier in the year, I published a post about the Dogs of the Dow Theory. Given we are fast approaching the mid point of 2015, I thought it would be a good time to provide an update. As a reminder:

“The Dogs of the Dow is an investing strategy that consists of buying the 10 DJIA stocks with the highest dividend yield at the beginning of the year. The portfolio should be adjusted at the beginning of each year to include the 10 highest yielding stocks.” – Investopedia

The 2015 Dogs

Below is the list of stocks that will make up the Dogs of the Dow theory for 2015. I’ve listed the beginning of year stock price and the current stock price so that you can see the performance of this year’s group:

2015 Dogs of the DOW

You can see above that overall, the strategy has performed reasonably well with PFE and GE the clear leaders. CVX, CAT and XOM have been under performers as the resources sector continues to struggle. When you take into consideration the healthy dividends on offer, holding these 10 stocks so far this year would have seen healthy gains.

Using Options To Trade The Dogs Of The Dow

In my previous article I discussed incorporating options into the Dogs of the Dow strategy by selling cash secured puts instead of purchasing the stocks. The example I gave was selling a March 20th $100 put for $4.20.

CVX

At the time, CVX was trading at $112.18. I ended up taking a similar trade by selling a March 20th $105 put for $3.55. At the time, CVX was trading at around $108. Below shows the particulars of the trade:

CVX cash secured put payoff

CVX bounced around a bit over the next month or so and at one point dipped below $100. By the expiry date on March 20th, CVX had recovered to close at $107.03. As such the $105 put expired worthless for a 3.38% return, or 16% annualized.

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This stuff isn’t sexy, but it does work. Next week, I’ll show you another example with EWZ.

3 Comments
  1. gino says:

    sounds promising

  2. William Talbot says:

    This is a great income strategy. I use Bull Put Spreads to minimize the draw down brokerage requires for a cash secured position. Also Credit PUT Spreads and Credit CALL Spreads are allowed in IRAs. Selling Call options on great companies in your core accounts can also add income to your holdings. Selling OPTIONS is a great way to improve your probability of success.
    Happy Trading.

  3. George says:

    Trader may trade ITM bull put spread if he or she expects lower or flat underlying price the following months. It may replace the short selling because it can be safer.

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