6 Month Investment

[Guest valueInv]

I have a sum of money that I have use for in six months. Right now it's just sitting in the bank. Any recommendations for investments?  Stocks are not suitable because of the time frame / bound.

[gfp]

Outside of researching promotional rates for money market accounts at various financial institutions, there are not a lot of low-risk, deposit type options that are worth the effort.

 

I use a strategy like this in similar situations.  This is just one example, using American Capital Agency.  The numbers vary and there are other securities that might be better choices, but you could do something like this:

 

This assumes 100 shares / one option contract -

 

long 100 sh AGNC:                  3389

buy 1 AGNC Jan 13 34 Put      +290

sell 1 AGNC Jan 13 34 Call          -98

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Net cost would be around  $3581

 

You would collect two dividend payments of 1.25 each in that time, or $250, plus the $11 from selling at 34.

 

261 / 3581 = 7.28%

 

[EDIT - this is incorrect, I messed this one up as you can see]

 

To get the options prices I listed, you would want to enter the orders together as an all-or-nothing spread order for a net debit of 1.92 or so in this example.

 

You could run a similar strategy with other high dividend payers that you think will maintain the dividend for the next 6 months.  There might be better choices out there, but you get the idea.

[Sullivcd]

Wouldn't this be worth $69? $3400 +  $250 = $3650 - $3581 = $69 / $3581 = 1.9%.  I could very easily be missing something.

[gfp]

my bad - made an error up there!

[Guest valueInv]

Thanks!