A Media Portfolio for Long-Term Investors

Additionally, you might set different strike prices or choose different expiration months on the basis of your near- and long-term sentiment. In addition, you'll have to factor in the risk that your shares could be called away and decide on a level of risk that's appropriate for you. As of Tuesday's close, with all three stocks up sharply, I would consider proceeding as follows:

Write the TWX May $30 calls

I would prefer to take the same approach with BCE and RCI, but with liquidity and the availability of strike prices a bit of an issue, I would refrain. Instead, as a potential alternative to buying BCE and RCI stock outright and directly, I would consider getting long via writing cash-secured puts on each name. I presently own BCE shares, but I am also short a BCE May $40 put.

If BCE trades below 40 between now and expiration in May, I could get put 100 shares of BCE at $40 for each contract I sold. If that put expires in-the-money by $0.01 or more (BCE trades below $40.00), I will almost definitely get put the stock.

I am fine with that possibility because I am long-term bullish BCE. If I get put shares, I will take another look at the covered calls and investigate writing one that is slightly out-of-the-money. If I do not get put shares, I will look out to June and write another put. In either case, you can continue to repeat this process, shifting between cash-secured put and covered call, going forward.

Because BCE, RCI and TWX pay dividends, I have even more incentive to scale into each position and reinvest that income on a regular basis. This is where a low-cost, no- or few-frills brokerage can make a lot of sense. In many accounts, the cost of periodically buying a relatively small number of shares can eat into returns. In my Options Investing Newsletter this coming Tuesday, I discuss how I get around this particularly thorny and important issue.