The Income Strategy Recommendation: QBE Insurance

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The Income Strategy is an extremely powerful portfolio strategy that incorporates a combination of Stock and Options. It is designed to produce a consistent monthly income while providing capital protection for the portfolio.

The Income Strategy is very popular with Self Managed Super Fund (SMSF) and longer term wealth building individuals

This is an Income Strategy Recommendation for investors looking to buy QBE shares at a discount to market. The recommended trade is to sell put options on QBE with the intent to purchase the shares. This recommendation is designed for investor looking to generate monthly income with capital protection. Instead of buying QBE shares today at market at $19.55 we can place this trade which gives an equivalent entry price at $18.60 a discount of 4.6% and a price I am happy to buy the shares at. Short-term traders can place a bull put spread, please contact us for more information on this trade.

Trade

  • Sell 1 contract QBE August $19.50 Puts   @ 95 cents
  • Buy 1 contract QBE August $16.00 Puts   @  5 cents

Net Credit 90 cents

Trade Summary

Maximum Profit – $900

Maximum Loss – $2,600

Breakeven – $18.60

Return on Share Value – 4.62%

Annualised Return on Share Value – 55.38%

Return on Risk (ROR) – 34.62%

Capital Protection – 82%

Reason for Trade

  • QBE is going ex-dividend in early September.
  • Technical Analysis – QBE is a buy at these levels with strong support at $18.70 and our breakeven is below this level.
  • Fundamental Analysis – QBE is a well managed company and should be part of all blue chip portfolios
  • Return on Risk above 30%

To speak with a Total Options Advisor about this trade please call 1300 368 316