A Media Portfolio for Long-Term Investors
NEW YORK ( TheStreet) -- I have spent a considerable portion of the last week discussing several media stocks on TheStreet. My article history contains stories that explain why I am bearish Netflix(NFLX) and Sirius XM (SIRI) and bullish Bell Canada (BCE) , Rogers Communications (RCI) , Time Warner (TWX) , Madison Square Garden (MSG) and Pandora(P) .
In this article, I outline a portfolio of media stocks that could work for some long-term investors who like to speculate a little and use options frequently, but conservatively as part of a growth-and-income portfolio. These are the same types of strategies we discuss each week with subscribers in my Options Investing Newsletter . As always, use these ideas as a starting point for your own research. Your unique circumstances might warrant a different approach.
Ultimately, I hope to illustrate how to work options into your portfolio at a basic, but worthwhile and productive level. You might use different stocks or methods to achieve similar goals.
In a portfolio like this, I want to keep a core of about 75% to 80% in dividend-paying growth stocks. In the remaining 20% to 25%, I take things in a progressively speculative direction.
Core (Initial Positions)
Your amount of available capital, time horizon (when you'll be needing your money) and risk aversion dictate how much money you can put into your initial positions. Ideally, I strive to write covered calls against each position. Your broker's commission structure influences whether or not it makes sense to execute covered calls.
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.