Margin Challenge – Episode Four – Ford

Rear tail light of classic Ford Thunderbird.

The margin challenge churns onward. Ford suspended their dividend which makes sense given their precarious position even before all the shutdowns started. The dividend of fifteen cents a share made for a beautiful yield for anyone who had bought in the olden days of $8.00 to $10.00 per share. Alas, it is gone. I assume that if and when they bring it back it will be a much lower and realistic dividend amount.

Thankfully Ford trades at high volume in the options market. This has provided me with solid chances to sell covered calls to generate a steady flow of option premium income. Super important given my holding these shares on margin. A buy and hold investor can sit and wait for the company to reinstate the dividend or wait for an eventual turn around. Buying and holding is not the goal for this challenge. It wouldn’t be nearly as exciting. I am working to generate income, and ideally generate more income then what I am paying out in interest. Let’s see how that formula is working out.

Margin Challenge Status – April 17

100 shares of F at $8.98 per share for total of $898.11 on margin.

  • Minus $10.25 in interest. Accruing at $0.125 a day. (82 days in)
  • Plus $15.00 from Q1 2020 dividend.
  • Plus $35.00 from premiums for selling 5 covered calls since the start of the challenge.

$36.12 ahead in the challenge on March 6, 2020.

Currently $39.75 ahead in the challenge.

Instead of listing each covered call I sold, as I did in past episodes, I have lumped them into one line so you don’t have to slog through 5 lines of dates and strike prices. Hit me up in the comments if you are a geek and you want those details.

I won’t rehash what I have already documented in Episode 3. So here’s the short hash. Stringing this play along is not ideal, but it is working. The return on investment is not glorious especially now with the dividend suspended. However, I am keeping the play afloat and profitable thanks to the vehicle of selling covered calls on my 100 shares.

I am hoping to have sold a few more lucrative covered calls before my May update. The current share price of Ford is well under my cost basis of $8.98 so I have been pretty conservative with my covered calls. Having a call option exercised at a $6.00 or $7.00 strike price would create an unprofitable end to the challenge. I may see some decent price action as the economy lurches around rumors and proposals for the reopening of states. We will see if I can navigate the volatility and capitalize on it.

Thanks again and see you in May.

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