A Relieved Market Rallies
A week ago, the market was teetering on the brink. But it teetered in the right direction.
The benchmark ten-year Treasury rate had soared above 4.8%, dangerously close to the late 2023 peak of about 5%. December CPI inflation was reported last week. A bad number could have thrust the 10-year rate above the peak, almost certainly prompting a selloff in stocks. But Wall Street was happy with the number and things went the other way.
The 10-year rate pulled back to 4.6%. And the S&P, along with previously beleaguered interest rate-sensitive stocks, rallied higher. Danger is averted, for now.
The market has rallied over the past year at least partially on the assumption that interest rates have peaked. News to the contrary could have forced a repricing. December CPI was better than expected and the gloomy interest rate narrative abated. Many who were talking about no Fed rate cuts or even a rate hike this year have changed their tune and now again expect rate cuts in 2025.
We’ll see if stocks can build on the rally after the gloom and doom has evaporated. While many stocks that had been under pressure have rallied, so have certain stocks that were already riding high.
Natural gas-related stocks have been on fire as the soaring electricity demand promises to deliver growth for the fuel in the years ahead. One stock that has ignited is natural gas exporter Cheniere Energy Partners (CQP). The price has soared in a short period of time and is at an all-time high. It’s ripe for a covered call, which is highlighted in this update.
Past month activity
January 7th
Sold CEG March 21st $260 call at $20 or better
Sold QCOM March 21st $160 call at $11 or better
NextEra Energy, Inc. (NEE) – Rating change – “HOLD” to “BUY”
January 14th
Toll Brothers, Inc. (TOL) – Rating change “BUY” to “HOLD”
January 17th
EPD Jan 17th $29.00 calls at $1.75 – EXPIRED
Enterprise Product Partners L.P. (EPD) – CALLED
January 21st
Sell CQP March 21st $60 call at $3.00 or better
TRADE ALERT
Sell CQP March 21st $60 call at $3.00 or better
Expiration date: March 21st
Strike price: $60.00
Call price: $3.00
Cheniere Energy Partners, L.P. (CPQ)
CQP was up 10% last week. It is now up 16% YTD and about 27% since the election. It just made a new all-time high. Rarely does a high-income stock move this much in a short period of time. Natural gas has been a red-hot sector over the last month or so. But stocks tend to pull back after a big surge like this when investors move their focus to something else. We’ll secure a great income and a potential high total return if it gets called.
Here are the three scenarios.
1. The stock closes above the $60.00 strike price at expiration.
Call premium: $3.00
Dividends: $2.43
Appreciation: $6.96 ($60.00 strike price minus $53.04 purchase price)
Total: $12.39 (total return will be 23.4% in 8 months)
2. The stock price closes below but near our $60 strike price.
Call premium: $3.00
Dividends: $2.43
Total: $5.43 (total income of 10.3% in 8 months)
3. The stock price declines.
There will be $5.43 in income to offset the decline. Plus, the original purchase price is about $7 per share below the strike price.
Portfolio Recap
AbbVie Inc. (ABBV)
Yield: 3.8%
The future looks good for this biotech company. AbbVie is turning the corner from the Humira expiration as new drugs Skyrizi and Rinvoq are expected to generate $19 billion this year, replacing nearly all the peak Humira revenue alone. The company returned to slow revenue growth in the second half of 2024 and is expected to generate “robust” growth this year. There are also several drugs that should receive FDA approval this year. ABBV returned a respectable 15% in 2024 but 2025 should be much better as greener pastures are finally arriving. But an early sticking point might be trepidation over the nomination of RFK to HHS and fears about pricing. BUY
AGNC Investment Corp. (AGNC)
Yield: 15.0%
After wallowing since October, AGNC had a nice rebound off the bottom last week. The December inflation report was to Wall Street’s liking and interest rate-sensitive stocks rebounded. The gloomy interest rate expectations of the past few months had been pressuring the price. Hopefully, the improved interest rate outlook will last for a while. Spreads are still higher as the fed funds rate has already been cut 1% and longer rates are higher. AGNC should be set up for a much better 2025. BUY
Ally Financial Inc. (ALLY)
Yield: 3.2%
Ally was up 8% last week. It had been floundering badly along with most other financial stocks as a soaring interest rate narrative took hold. But it rallied last week as big bank earnings were stellar and December inflation was okay. Now, there are renewed expectations for the Fed to cut rates this year. Plus, the regulatory environment is certain to become much more friendly in the new administration. Analysts are also expecting earnings growth of 40% in 2025. BUY
Cheniere Energy Partners, L.P. (CQP)
Yield: 5.6%
This high-yielding liquid natural gas export partnership has gotten a move on. It was up 10% last week. It is now up 16% YTD and about 27% since the election. Natural gas-related stocks have also been strong as electricity demand skyrockets and the use of the fuel is expanding both in the U.S. and overseas. The incoming administration is highly encouraging of natural gas exports and Cheniere is the country’s largest exporter. The longer-term situation was always strong and now the short-term situation is improving. (This security generates a K1 form at tax time). BUY
Constellation Energy Corporation (CEG)
Yield: 0.5%
This nuclear power company stock is red hot. It’s up about 40% so far this month and over 60% since being added to the portfolio in August. The stock soared over 25% in one day after the company announced it would acquire natural gas and geothermal electricity giant Calpine Corp. Obviously, the market likes the deal. The acquisition makes Constellation the biggest independent electricity provider in the nation at a time when demand for electricity is skyrocketing because of artificial intelligence.
The company was already the largest provider of clean energy for electricity, and this makes them a giant. Carbon-free or friendly power generation is the most desirable for technology companies looking to secure power sources for their massive data center needs. The purchase puts Constellation even more in the catbird seat of a massive trend. CEG soared above the post-deal high after pulling back. The electricity thing is a hot trade in the market right now. HOLD
NextEra Energy, Inc. (NEE)
Yield: 2.9%
The regulated and clean energy utility rallied 5% last week as the good news about inflation and interest rates ignited the stock. It’s cheap and well-positioned as interest rates should at least not go much higher, and electricity demand is booming. NEE was a superstar stock until 2022 when inflation and rising interest rates kicked in. But it recovered in 2024 and returned about 20%. The recent volatility is from the macro environment and not the internal operations of the company. NextEra expects to deliver 10% average earnings and dividend growth over the next several years, and it has a long track record of successfully delivering. It’s been held back by the interest rate narrative which is improving for now. BUY
Qualcomm Corp. (QCOM)
Yield: 2.1%
Although QCOM had a strong week, it’s still stuck in the mud in the recent range. It’s way below the June high and still the same price it was last spring. But we have sold four calls on the stock and ratcheted up the return despite the recent lack of appreciation. It’s worth being patient because when this stock moves it easily makes up for lost time. And it will take off at some point. The market wants to see strong U.S. smartphone sales from an AI upgrade cycle. Although that hasn’t happened yet, it could become a catalyst sometime this year. BUY
Realty Income Corp. (O)
Yield: 5.8%
The legendary monthly income REIT has rallied along with most interest rate-sensitive stocks over the last week. It had tumbled back to near the yearly lows after riding high for a while in the summer and fall. Although it has a stable and growing business and an unparalleled track record of increasing monthly dividends, O has been a slave to the changing interest rate narrative. Lately, that’s been a bad thing, but things are changing for the better. HOLD
Toll Brothers, Inc. (TOL)
Yield: 0.6%
After a tough couple of months, this luxury homebuilder company’s stock soared 10% in the past week. The recent better news about the likely direction of mortgage rates was the main catalyst. TOL was downgraded to a hold over the past week as the recent glum interest rate outlook combined with the inflation report coming out last week presented a high level of short-term risk. Last week turned out well. But the stock will still be rated a HOLD until the recent upside is more established. HOLD
Existing Call Trades
Sell EPD Jan 17th $29.00 calls at $1.75 – Expired
Call premium: $1.75
Dividends: $2.09
Appreciation: $1.39 ($29.00 strike price minus $27.61 purchase price)
Total: $5.23 (total return will be 18.9% in 11 months)
Midstream energy stocks are hot and staying that way. EPD is a good one that did get called away. The calls were sold when the stock was near a new high, but it had another big leg higher after the election. We got about a 19% total return in less than a year. The midstream space should be strong going forward and stocks are likely to be added back to the portfolio at the next pullback.
Sell CEG March 21st $260 call at $20 or better
I know. We sold these calls too early as CEG soared 20% since. We missed out and could have sold a call for a massively higher price and/or secured a huge total return. But it’s not that bad. We sold two calls so far on the stock for a total of $44 in premiums and the strike price is 260. We will get a huge total return in a short period of time if it is called. If not, we can sell more calls down the road.
Sell QCOM March 21st $160 call at $11 or better
The stock moved above the strike price after a big week. It’s still stuck in the same range since the spring though. QCOM has a good chance to take off sometime this year, but we’ll see where the price is on options expiration in March. We secured a great income in addition to the four other calls sold on this stock over the past few years.
Current Recommendations
Open Recommendations | Ticker Symbol | Entry Date | Entry Price | Recent Price | Buy at or Under Price | Yield |
AbbVie Inc. | ABBV | 12/17/24 | $175.38 | $171.56 | $200.00 | 3.82% |
AGNC Investment Corp | AGNC | 9/24/24 | $10.47 | $9.61 | $12.00 | 14.98% |
Ally Financial Inc. | ALLY | 11/26/24 | $39.42 | $36.93 | $45.00 | 3.25% |
Cheniere Energy Prtns. | CQP | 7/23/24 | $53.04 | $62.14 | $60.00 | 5.58% |
Constellation Energy Corp. | CEG | 8/27/24 | $196.14 | $316.36 | $270.00 | 0.45% |
NextEra Energy, Inc. | NEE | 4/25/23 | $77.50 | $70.76 | $80.00 | 2.91% |
Qualcomm Inc. | QCOM | 5/5/21 | $134.65 | $164.56 | $180.00 | 2.07% |
Realty Income Corp. | O | 6/27/23 | $60.19 | $54.62 | NA | 5.80% |
Toll Brothers, Inc. | TOL | 10/22/24 | $148.02 | $135.16 | NA | 0.60% |
Open Recommendations | Ticker Symbol | Initial Action | Entry Date | Entry Price | Recent Price | Sell To Price or better |
CEG Mar 21 $260 | CEG250321C00260000 | Sell | 1/7/25 | $20.00 | $62.30 | $20.00 |
QCOM Mar 21 $160 call | QCOM250321C00160000 | Sell | 1/7/25 | $11.00 | $12.10 | $10.00 |
CQP Mar 21 $60 call | CQP250321C00060000 | Sell Pending | $2.75 | $3.00 | ||
as of close on 1/17/2025 | ||||||
SOLD STOCKS | ||||||
X | Ticker Symbol | Action | Entry Date | Entry Price | Sale Date | Sale Price |
Innovative Industrial Props. | IIPR | Called | 6/2/20 | $87.82 | 9/18/20 | $100.00 |
Qualcomm | QCOM | Called | 6/24/20 | $89.14 | 9/18/20 | $95.00 |
U.S. Bancorp | USB | Called | 7/22/20 | $36.26 | 9/18/20 | $38 |
Brookfield Infras. Ptnrs. | BIP | Called | 6/24/20 | $41.92 | 10/16/20 | $45 |
Starbucks Corp. | SBUX | Called | 8/26/20 | $82.41 | 10/16/20 | $88 |
Visa Corporation | V | Called | 9/22/20 | $200.56 | 11/20/20 | $200 |
AbbVie Inc. | ABBV | Called | 6/2/20 | $91.04 | 12/31/20 | $100 |
Enterprise Prod. Prtnrs. | EPD | Called | 6/24/20 | $18.14 | 1/15/21 | $20 |
Altria Group | MO | Called | 6/2/20 | $39.66 | 1/15/21 | $40 |
U.S. Bancorp | USB | Called | 11/25/20 | $44.68 | 1/15/21 | $45 |
B&G Foods Inc, | BGS | Called | 10/28/20 | $26.79 | 2/19/21 | $28 |
Valero Energy Inc. | VLO | Called | 8/26/20 | $53.70 | 3/26/21 | $60 |
Chevron Corp. | CVX | Called | 12/23/20 | $85.69 | 4/1/21 | $96 |
KKR & Co. | KKR | Called | 3/24/21 | $47.98 | 6/18/21 | $55 |
Digital Realty Trust | DLR | Called | 1/27/21 | $149.17 | 7/16/21 | $155 |
NextEra Energy, Inc. | NEE | Called | 2/24/21 | $73.76 | 9/17/21 | $80 |
Brookfield Infras. Ptnrs. | BIP | Called | 1/13/21 | $50.63 | 10/15/21 | $55 |
AGNC Investment Corp | AGNC | Sold | 1/13/21 | $15.52 | 1/19/22 | $15 |
ONEOK, Inc. | OKE | Called | 5/26/21 | $52.51 | 2/18/22 | $60 |
KKR & Co. | KKR | Sold | 8/25/21 | $64.52 | 2/23/22 | $58 |
Valero Energy Inc. | VLO | Called | 11/17/21 | $73.45 | 2/25/22 | $83 |
U.S Bancorp | USB | Sold | 3/24/21 | $53.47 | 4/13/22 | $51 |
Enterprise Product Ptnrs | EPD | Called | 3/17/21 | $23.21 | 4/14/22 | $24 |
FS KKR Capital Corp. | FSK | Called | 10/27/21 | $22.01 | 4/14/22 | $23 |
Xcel Energy Inc. | XEL | Called | 10/12/21 | $63.00 | 5/20/22 | $70 |
Innovative Industrial Props. | IIPR | Sold | 3/23/22 | $196.31 | 7/20/22 | $93 |
One Liberty Properties | OLP | Sold | 7/28/21 | $30.37 | 8/24/22 | $25 |
ONEOK, Inc. | OKE | Called | 5/25/22 | $65.14 | 1/20/23 | $65 |
Xcel Energy, Inc. | XEL | Called | 10/26/22 | $62.57 | 1/20/23 | $65 |
Realty Income Corp. | O | Called | 9/28/22 | $60.37 | 2/17/23 | $63 |
Medical Properties Trust | MPW | Sold | 1/24/23 | $13.22 | 3/21/23 | $8 |
Brookfield Infrastructure Cp. | BIPC | Called | 11/9/22 | $42.43 | 7/21/23 | $45 |
Star Bulk Carriers Corp. | SBLK | Sold | 6/1/22 | $33.30 | 8/8/23 | $18 |
Visa Inc. | V | Called | 12/22/21 | $217.16 | 8/18/23 | $235 |
Global Ship Lease, Inc. | GSL | Sold | 2/23/22 | $24.96 | 8/29/23 | $19 |
ONEOK, Inc. | OKE | Called | 3/28/23 | $60.98 | 9/15/23 | $65 |
Hess Corporation | HES | Called | 6/6/23 | $132.25 | 10/20/23 | $155 |
Tractor Supply Company | TSCO | Sold | 9/26/23 | $203.03 | 11/28/23 | $200 |
Digital Realty Trust | DLR | Called | 7/18/23 | $117.31 | 1/19/24 | $135 |
Intel Corporation | INTC | Called | 7/27/22 | $40.18 | 1/19/24 | $43 |
AbbVie Inc. | ABBV | Called | 7/25/23 | $141.63 | 3/15/24 | $160 |
Marathon Petroleum Corp. | MPC | Called | 10/24/23 | $149.45 | 3/28/24 | $165 |
The Williams Companies, Inc. | WMB | Called | 8/24/22 | $35.58 | 5/17/24 | $35 |
Main Street Capital Corp. | MAIN | Called | 3/26/24 | $46.40 | 9/20/24 | $49 |
Brookfield Infrastructure Cp. | BIPC | Called | 2/27/24 | $32.64 | 9/20/24 | $35 |
American Tower Corp. | AMT | Called | 1/23/24 | $202.26 | 9/20/24 | $210 |
ONEOK, Inc. | OKE | Called | 8/27/24 | $79.59 | 10/18/24 | $88 |
Alexandria Real Estate Eq. | ARE | Sold | 12/19/23 | $129.54 | 11/19/24 | $108 |
FS KKR Capital Corp. | FSK | Called | 4/23/24 | $19.42 | 12/20/24 | $20 |
Enterpise Product Ptnrs. | EPD | Called | 2/27/24 | $27.61 | 1/17/25 | $29 |
EXPIRED OPTIONS | ||||||
Security | In/out money | Sell Date | Sell Price | Exp. Date | $ return | Total % Return |
IIPR Jul 17 $95 call | out-of money | 6/3/20 | $3.00 | 7/17/20 | $3.00 | 3.40% |
MO Jul 31 $42 call | out-of-money | 6/17/20 | $1.60 | 7/31/20 | $1.60 | 4.03% |
ABBV Sep 18 $100 call | out-of-money | 7/15/20 | $4.60 | 9/18/20 | $4.60 | 5.05% |
IIPR Sep 18 $100 call | in-the-money | 7/22/20 | $5.00 | 9/18/20 | $5.00 | 5.69% |
QCOM Sep 18 $95 call | in-the-money | 6/24/20 | $4.30 | 9/18/20 | $4.30 | 4.82% |
USB Sep 18 $37.50 call | in-the-money | 7/22/20 | $2.00 | 9/18/20 | $2.00 | 5.52% |
BIP Oct 16 $45 call | in-the-money | 9/2/20 | $1.95 | 10/16/20 | $1.95 | 4.65% |
SBUX Oct 16 $87.50 call | in-the-money | 10/16/20 | $3.30 | 10/16/20 | $3.30 | 4.00% |
V Nov 20 $200 call | in-the-money | 9/22/20 | $10.00 | 11/20/20 | $10.00 | 4.99% |
ABBV Dec 31 $100 call | in-the-money | 11/18/20 | $3.30 | 12/31/20 | $3.30 | 3.62% |
EPD Jan 15 $20 call | in-the-money | 11/23/20 | $0.80 | 1/15/21 | $0.80 | 4.41% |
MO Jan 15 $40 call | in-the-money | 11/25/20 | $1.90 | 1/15/21 | $1.90 | 4.79% |
USB Jan 15 $45 call | in-the-money | 11/25/20 | $2.00 | 1/15/21 | $2.00 | 4.48% |
BGS Feb 19 $27.50 call | in-the-money | 12/11/20 | $2.40 | 2/19/21 | $2.40 | 8.96% |
VLO Mar 26 $60 call | in-the-money | 2/10/21 | $6.50 | 3/26/21 | $6.50 | 12.10% |
CVX Apr 1 $95.50 call | in-the-money | 2/19/21 | $4.30 | 4/1/21 | $4.30 | 5.02% |
AGNC Jun 18 $17 call | out-of-money | 4/13/21 | $0.50 | 6/18/21 | $0.50 | 3.21% |
KKR Jun 18 $55 call | in-the-money | 4/28/21 | $3.00 | 6/18/21 | $3.00 | 6.25% |
USB Jun 16 $57.50 call | out-of-money | 4/28/21 | $2.80 | 6/18/21 | $2.80 | 5.24% |
DLR Jul 16 $155 call | in-the-money | 6/16/21 | $8.00 | 7/16/21 | $8.00 | 5.36% |
AGNC Aug 20 $17 call | out-of-money | 6/23/21 | $0.50 | 8/20/21 | $0.50 | 3.00% |
OKE Aug 20 $57.50 call | out-of-money | 6/23/21 | $3.50 | 8/20/21 | $3.50 | 6.67% |
NEE Sep 17 $80 call | in-the-money | 8/11/21 | $3.50 | 9/17/21 | $3.50 | 4.75% |
BIP Oct 15 $55 call | in-the-money | 9/1/21 | $2.00 | 10/15/21 | $2.00 | 3.95% |
USB Nov 19 $60 call | out-of-money | 9/24/21 | $2.30 | 11/19/21 | $2.30 | 4.30% |
OKE Nov 26 $65 call | out-of-money | 10/20/21 | $2.25 | 11/26/21 | $2.25 | 4.28% |
KKR Dec 17 $75 call | out-of-money | 10/26/21 | $3.50 | 12/17/21 | $3.50 | 5.42% |
QCOM Jan 21 $185 Call | out-of-money | 11/30/21 | $9.65 | 1/21/22 | $9.65 | 7.17% |
OLP Feb 18 $35 Call | out-of-money | 11/19/21 | $1.50 | 2/18/22 | $1.50 | 4.94% |
OKE Feb 18 $60 Call | in-the-money | 1/5/22 | $2.75 | 2/18/22 | $2.75 | 5.24% |
USB Feb 25 $61 call | out-of-money | 1/13/22 | $2.50 | 2/25/22 | $2.50 | 4.68% |
VLO Feb 25 $83 call | in-the-money | 1/18/22 | $4.20 | 2/25/22 | $4.20 | 6.13% |
EPD Apr 14th $24 call | in-the-money | 3/2/22 | $1.25 | 4/14/22 | $1.25 | 5.69% |
FSK Apr 14th $22.50 call | in-the-money | 3/10/22 | $0.90 | 4/14/22 | $0.90 | 4.09% |
XEL May 20th $70 call | in-the-money | 3/30/22 | $3.00 | 5/20/22 | $3.00 | 4.76% |
SBLK July 15th $134 call | out-of-money | 6/1/22 | $1.60 | 7/15/22 | $1.60 | 4.80% |
OKE Oct 21st $65 call | out-of-money | 8/24/22 | $3.40 | 10/21/22 | $3.40 | 5.22% |
OKE Jan 20th $65 call | In-the-money | 11/25/22 | $3.70 | 1/20/23 | $3.70 | 5.68% |
XEL Jan 20th $65 call | in-the-money | 11/25/22 | $5.00 | 1/20/23 | $5.00 | 7.99% |
O Feb 17th $62.50 call | in-the-money | 12/28/22 | $3.00 | 2/17/23 | $3.00 | 4.97% |
QCOM Sep 16th $145 call | out-of-money | 7/20/22 | $11.75 | 9/16/22 | $11.75 | 8.73% |
V Mar 17th $220 call | out-of-money | 1/24/23 | $12.00 | 3/17/23 | $12.00 | 5.51% |
OKE May 19th $65 call | out-of-money | 4/11/23 | $2.70 | 5/19/23 | $2.70 | 4.43% |
V Jun 2 $230 call | out-of-money | 4/21/23 | $10.50 | 6/2/23 | $10.50 | 4.82% |
BIPC $45 July 21st call | in-the-money | 5/23/23 | $3.25 | 7/21/23 | $3.25 | 7.66% |
V $235 Aug 18th call | in-the-money | 7/11/23 | $9.00 | 8/18/23 | $9.00 | 4.13% |
GSL $20 Aug 18th call | out-of-money | 7/11/23 | $1.25 | 8/18/23 | $1.25 | 5.00% |
OKE $65 Sep 15 call | in-the-money | 9/15/23 | $3.20 | 7/25/23 | $3.20 | 4.92% |
INTC $35 Oct 20th call | out-of-money | 9/8/23 | $3.78 | 10/20/23 | $3.78 | 9.41% |
HES $155 Oct 20th call | in-the-money | 9/8/23 | $9.00 | 10/20/23 | $9.00 | 6.81% |
DLR $135 Jan 19th call | in-the-money | 11/22/23 | $6.00 | 1/19/24 | $6.00 | 5.11% |
INTC $42.50 Jan 19th call | in-the-money | 11/29/23 | $3.50 | 1/19/24 | $3.50 | 8.71% |
ABBV $160 Mar 15th call | in-the-money | 1/10/24 | $7.00 | 3/15/24 | $7.00 | 4.94% |
MPC $165 Mar 28th call | in-the-money | 2/14/23 | $10.00 | 3/28/24 | $10.00 | 6.69% |
QCOM $200 July 19th call | out-of-money | 6/5/24 | $12.00 | 7/19/24 | $12.00 | 8.91% |
MAIN $49.4 Sep 20th Call | in-the-money | 6/27/24 | $2.00 | 9/20/24 | $2.00 | 4.31% |
BIPC $35 Sep 20th Call | in-the-money | 7/16/24 | $3.00 | 9/20/24 | $3.00 | 9.19% |
AMT Sep 20 $210 call | in-the-money | 7/30/24 | $15.00 | 9/20/24 | $15.00 | 7.42% |
OKE Oct 18 $87.50 call | in-the-money | 8/27/24 | $3.50 | 10/18/24 | $3.50 | 4.40% |
FSK Dec 20 $20 call | in-the-money | 10/25/24 | $0.95 | 12/20/25 | $0.95 | 4.89% |
CEG Dec 29 $260 call | out-of-money | 9/25/24 | $24.00 | 12/20/24 | $24.00 | 12.24% |
EPD Jan 17 $29 call | in-the-money | 11/12/24 | $2.00 | 1/17/25 | $2.00 | 6.34% |
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