Omega Healthcare Investors Risk Reversal (OHI)


Initial Trade on February 4th

Buy 5x Jan 21st 2022 $37 Call: $3.68

Sell 5x Jan 21st 2022 $35 Put: $4.33

Total Cost = ($0.65) per share

Call Break Even At Expiration = $36.35

Put Break Even At Expiration = $34.35

Initial Thoughts on Trade

OHI is a healthcare REIT that yields 7.2%. This is a safe reliable dividend payer that I don’t mind owning shares of in the future. Shares have traded in an extremely tight range since November and I want to express my bullish opinion via a risk reversal. This trade is a synthetic long stock position so I have unlimited upside, and if the stock were to fall, the cost of my shares would be $34.35 which is an 8% discount from where it is trading now. I like the risk reward of this trade and I don’t foresee a lot of active management for the life of it. Usually I would sell calls against a long call position, but a stock like this doesn’t have high enough premiums for me to do so. I have an upside sell target in mind of about $45, but that’s quite a ways up from the current price of $37.30, so we will revisit this should there be any unexpected moves in the stock.

Trade Update March 9th

As expected for a sleepy healthcare REIT, OHI hasn’t moved much in the time I’ve owned it. I sold some next week $38 calls to further reduce the cost of this trade. The intention here is to close the trade if it breaks through that $38 for a small profit It’s not that I don’t like the stock anymore, but I am in the process of transitioning to another brokerage and I’d like to free up some capital/margin room to begin that process. We’ll see if we get there by the end of next week.

Sell 5x Mar 19th 2022 $38 Call: ($0.35)

Total Cost = ($1.00) per share

Call Break Even At Expiration = $36.00

Put Break Even At Expiration = $34.00

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