KHC
The Kraft Heinz Company Common Stock
stock NASDAQ

​
About a month ago, I posted this $1,000 challenge portfolio here. The idea was simple: instead of chasing whatever stock was hot that week, I wanted to see what would happen if I spread $1,000 across 20 dividend-paying companies that I believed were undervalued.
I also wanted to make the experiment public so there was no hindsight involved. The original list was posted before I knew which companies would outperform and which ones would disappoint.
30 days later, the portfolio is up 6.24%.
The account is currently worth $1,084.50, including additional funds/dividends reflected in the account, with the brokerage showing +$63.73 (+6.24%) over the past month.
The original 20 companies were:
1. DOW — Dow
2. BDX — Becton, Dickinson and Company
3. GSK — GSK plc
4. MDT — Medtronic
5. PEP — PepsiCo
6. ELV — Elevance Health
7. CVS — CVS Health
8. PFE — Pfizer
9. BMY — Bristol Myers Squibb
10. WPC — W. P. Carey
11. LNC — Lincoln National
12. BEN — Franklin Resources
13. USB — U.S. Bancorp
14. STX — Seagate Technology
15. ADM — Archer-Daniels-Midland
16. KEY — KeyCorp
17. T — AT&T
18. VZ — Verizon
19. KHC — Kraft Heinz
20. NEM — Newmont
What interests me isn't really the 6.24%. Thirty days is far too short to declare victory on an investing strategy, and this portfolio will eventually have periods where it underperforms.
What I wanted to test was whether a diversified basket of beaten-down, dividend-paying companies selected primarily on valuation and fundamentals could produce competitive returns without relying on a handful of high-growth momentum stocks.
So far, the answer has been encouraging.
There have already been clear winners and laggards. STX has recently been one of the strongest movers, while other positions have contributed much less. That's exactly why I used 20 companies instead of trying to guess which two or three would perform best.
Diversification wasn't supposed to eliminate losers. It was supposed to make being wrong about a few companies survivable while allowing the stronger picks to pull the portfolio forward.
I'll keep posting updates whether the account is green or red. The more interesting test isn't what happens in the first 30 days. It's whether this portfolio can continue producing respectable total returns over 6 months, 12 months, and eventually longer while collecting dividends along the way.
For the value investors here: which of these 20 would you be most comfortable holding for the next five years, and which one would you remove today?
https://substack.com/@legitimaterisk/note/c-314871671?r=8pfry2

most right anybody’s been in this thread, no argument. edge is what you get paid minus what actually happens. the fat number doesn’t tell you if it’s a good sell, and boring doesn’t save you when the sleepy one surprises. KHC and PG&E, yep.
only difference is who we’re talking to. you’re telling people how to sell well. i’m telling the guy sorting his screen by biggest premium to knock it off first. everything you said is what he learns next.
and you’re right that sorting by premium is just sorting by expected move with no idea what’s overpriced. that’s the whole problem with those screeners. we’re on the same side, you’re just further down the road.

You're describing implied vol. The premium is the market's forecast of the move, and yeah, a fat premium means a big expected move rather than free money. That half is right, and many sellers never get there.
Where your premise is wrong though: The size of the premium says nothing about whether the sell is good. The only question is whether the move you're being paid for is bigger than the move that actually happens. Sell 120 IV that realizes 70 and the scary earnings name was a great sell. Sell 14 IV on the sleepy dividend stock while it realizes 20 and you lose money. The edge is implied minus realized. Premium size doesn't enter into it.
Same reason the screener habit fails btw, sorting by premium is just sorting by expected move. The sort has no idea what's overpriced.
Priced right means no edge. You're collecting exactly what the risk is worth, then paying spread and commissions out of it. The only reason to sell any option is you think it's priced wrong in your favor, and that can be the scary earnings name as easily as the utility.
Honestly this is the whole game, not just a CC thing. Every option trade is a bet on how much the stock actually moves vs what's priced in. Sellers want less than that, buyers need more. Even buying a call because you think it's going up, you're making a vol bet whether you know it or not, the thing still has to move more than what you paid.
Also, a calm stock is just one the market expects to be calm. KHC was about as sleepy as dividend names get, then feb 2019 it cut the dividend and disclosed an SEC subpoena, down 27% in one day. PG&E was an actual utility and lost something like two thirds of its value in two weeks on wildfire liability. The small premium only ever meant less was expected, and expected can be wrong. When it is, you eat the same left tail, you just got paid less to stand there.
"Worked for a while, then it didn't" is what selling premium with no vol view looks like. The boring pile does it too, slower.

​
About a month ago, I posted this $1,000 challenge portfolio here. The idea was simple: instead of chasing whatever stock was hot that week, I wanted to see what would happen if I spread $1,000 across 20 dividend-paying companies that I believed were undervalued.
I also wanted to make the experiment public so there was no hindsight involved. The original list was posted before I knew which companies would outperform and which ones would disappoint.
30 days later, the portfolio is up 6.24%.
The account is currently worth $1,084.50, including additional funds/dividends reflected in the account, with the brokerage showing +$63.73 (+6.24%) over the past month.
The original 20 companies were:
1. DOW — Dow
2. BDX — Becton, Dickinson and Company
3. GSK — GSK plc
4. MDT — Medtronic
5. PEP — PepsiCo
6. ELV — Elevance Health
7. CVS — CVS Health
8. PFE — Pfizer
9. BMY — Bristol Myers Squibb
10. WPC — W. P. Carey
11. LNC — Lincoln National
12. BEN — Franklin Resources
13. USB — U.S. Bancorp
14. STX — Seagate Technology
15. ADM — Archer-Daniels-Midland
16. KEY — KeyCorp
17. T — AT&T
18. VZ — Verizon
19. KHC — Kraft Heinz
20. NEM — Newmont
What interests me isn't really the 6.24%. Thirty days is far too short to declare victory on an investing strategy, and this portfolio will eventually have periods where it underperforms.
What I wanted to test was whether a diversified basket of beaten-down, dividend-paying companies selected primarily on valuation and fundamentals could produce competitive returns without relying on a handful of high-growth momentum stocks.
So far, the answer has been encouraging.
There have already been clear winners and laggards. STX has recently been one of the strongest movers, while other positions have contributed much less. That's exactly why I used 20 companies instead of trying to guess which two or three would perform best.
Diversification wasn't supposed to eliminate losers. It was supposed to make being wrong about a few companies survivable while allowing the stronger picks to pull the portfolio forward.
I'll keep posting updates whether the account is green or red. The more interesting test isn't what happens in the first 30 days. It's whether this portfolio can continue producing respectable total returns over 6 months, 12 months, and eventually longer while collecting dividends along the way.
For the value investors here: which of these 20 would you be most comfortable holding for the next five years, and which one would you remove today?
https://substack.com/@legitimaterisk/note/c-314871671?r=8pfry2

most right anybody’s been in this thread, no argument. edge is what you get paid minus what actually happens. the fat number doesn’t tell you if it’s a good sell, and boring doesn’t save you when the sleepy one surprises. KHC and PG&E, yep.
only difference is who we’re talking to. you’re telling people how to sell well. i’m telling the guy sorting his screen by biggest premium to knock it off first. everything you said is what he learns next.
and you’re right that sorting by premium is just sorting by expected move with no idea what’s overpriced. that’s the whole problem with those screeners. we’re on the same side, you’re just further down the road.

You're describing implied vol. The premium is the market's forecast of the move, and yeah, a fat premium means a big expected move rather than free money. That half is right, and many sellers never get there.
Where your premise is wrong though: The size of the premium says nothing about whether the sell is good. The only question is whether the move you're being paid for is bigger than the move that actually happens. Sell 120 IV that realizes 70 and the scary earnings name was a great sell. Sell 14 IV on the sleepy dividend stock while it realizes 20 and you lose money. The edge is implied minus realized. Premium size doesn't enter into it.
Same reason the screener habit fails btw, sorting by premium is just sorting by expected move. The sort has no idea what's overpriced.
Priced right means no edge. You're collecting exactly what the risk is worth, then paying spread and commissions out of it. The only reason to sell any option is you think it's priced wrong in your favor, and that can be the scary earnings name as easily as the utility.
Honestly this is the whole game, not just a CC thing. Every option trade is a bet on how much the stock actually moves vs what's priced in. Sellers want less than that, buyers need more. Even buying a call because you think it's going up, you're making a vol bet whether you know it or not, the thing still has to move more than what you paid.
Also, a calm stock is just one the market expects to be calm. KHC was about as sleepy as dividend names get, then feb 2019 it cut the dividend and disclosed an SEC subpoena, down 27% in one day. PG&E was an actual utility and lost something like two thirds of its value in two weeks on wildfire liability. The small premium only ever meant less was expected, and expected can be wrong. When it is, you eat the same left tail, you just got paid less to stand there.
"Worked for a while, then it didn't" is what selling premium with no vol view looks like. The boring pile does it too, slower.