3 ms·

Found some Mass. bonds (because it's my home state, so tax-free for both federal and state) yielding 6.43% just now, with expiration date of 2029-05-01 and with

Found some Mass. bonds (because it's my home state, so tax-free for both federal and state) yielding 6.43% just now, with expiration date of 2029-05-01 and with credit rating of AA+ http://massachusetts.municipalbonds.com/bonds/issue/914440KJ0 http://massachusetts.municipalbonds.com/bonds/issue/914440KJ.... Also can also buy some REITs with annual high-dividend yield of 17% such as AGNC or NLY. These are a bit riskier due to fluctuating principal out on the open equity market. However, can mitigate this risk by owning ITM calls prior to ex-dividend dates and capture also run-up profits.

bsims 14y ago
Thanks for sharing a specific example. Could be an interesting investment. At the same time, you have to weigh out the other risks such as Mass. being one of the most in debt states in the country. http://www.usgovernmentspending.com/state_debt_rank http://www.usgovernmentspending.com/state_debt_rank
bokonist 14y ago
Can you actually buy them at that price? Don't they get auctioned off, and so that the actual yield is lower? From reading that web page it looks like the effective yield was only 4-4.5%
- bokonist 14y ago
  UPDATE: as svachalek points out, the 4-4.5% is not even the right yield. That is 4.5% interest per year, but if you pay $110 for the bond, you will only get a principal returned of $100, so the effective yield-to-maturity is even lower.
aliston 14y ago
Could you explain the second part of your comment... I'm not sure I quite understand what you're saying. Wouldn't owning calls hurt you when the stock price likely falls post-ex-dividend? I'm pretty new to options trading... Also, are you speaking from experience with your hypothetical? If so, I'd be interested in discussing some other things further.
svachalek 14y ago
I can't see the details on this because I'm not going to set up an account, but in general don't believe the yield; you want to see the yield-to-worst. http://www.forbes.com/sites/rickferri/2012/07/19/the-yield-trap/ http://www.forbes.com/sites/rickferri/2012/07/19/the-yield-t...
prostoalex 14y ago
>> can mitigate this risk by owning ITM calls prior to ex-dividend dates Don't forget to mention that those calls aren't cheap.

bsims 14y ago

Thanks for sharing a specific example. Could be an interesting investment. At the same time, you have to weigh out the other risks such as Mass. being one of the most in debt states in the country. http://www.usgovernmentspending.com/state_debt_rank http://www.usgovernmentspending.com/state_debt_rank

bokonist 14y ago

Can you actually buy them at that price? Don't they get auctioned off, and so that the actual yield is lower? From reading that web page it looks like the effective yield was only 4-4.5%

bokonist 14y ago
UPDATE: as svachalek points out, the 4-4.5% is not even the right yield. That is 4.5% interest per year, but if you pay $110 for the bond, you will only get a principal returned of $100, so the effective yield-to-maturity is even lower.

aliston 14y ago

Could you explain the second part of your comment... I'm not sure I quite understand what you're saying. Wouldn't owning calls hurt you when the stock price likely falls post-ex-dividend? I'm pretty new to options trading... Also, are you speaking from experience with your hypothetical? If so, I'd be interested in discussing some other things further.

svachalek 14y ago

I can't see the details on this because I'm not going to set up an account, but in general don't believe the yield; you want to see the yield-to-worst. http://www.forbes.com/sites/rickferri/2012/07/19/the-yield-trap/ http://www.forbes.com/sites/rickferri/2012/07/19/the-yield-t...

prostoalex 14y ago

>> can mitigate this risk by owning ITM calls prior to ex-dividend dates Don't forget to mention that those calls aren't cheap.