2 Names I’m Adding to as Expirations Create Dry Powder
Here are the top two positions worthy of additions as my cash position grows.
You've reached your free article limit
You've read 0 of 1 free Pro articles.
The markets have navigated through the first rate hike by the Federal Reserve since 2023 quite well this week. In fact, equities have held up admirably given that investors came into 2026 with the consensus that the federal funds rate would be cut twice by 25 BPS by the end of the year.
Instead, based on the most recent dot plot, there will two 25 BPS rate hikes here in 2026. As Bob Dylan would say, “The times they are a changing.”
We will see if this monetary tightening can calm the bond markets after the 10-Year treasury yield hit its highest level since 2007 earlier this week. As noted on Thursday in the Daily Diary, the average return for the quarter following the first Fed rate hike in a cycle is -4%.
Despite this, Friday is my favorite trading day of every month, the third Friday in September. That means option expiration day.
This month a particularly large number of my covered-call holdings will expire in the money. This will boost my cash and short-term treasury position from approximately 25% to an uncomfortable just-over 35%. That means I need to find some names to put some “dry powder” to work in the weeks ahead via covered call orders in what feels like an overbought market.
In today’s column, I will highlight a couple of existing positions that I will be likely adding to in the trading sessions ahead.
The first name is Occidental Petroleum Corporation (OXY), albeit this is more of rebuilding a holding, as most of the position I established early this year will expire in the money upon market close on Friday.
My regular readers know, as I have stated from the beginning, that this conflict in the Middle East that started at the end of February will be harder and take much longer to resolve than the administration has consistently stated. That means energy prices will remain higher for longer. Occidental is one of many E&P concerns that will benefit from that dynamic.
The company crushed top- and bottom-line expectations when it reported Q2 results on August 5. Revenues rose 57% on a year-over-year basis and management is projecting $4 billion of sustainable annual free cash flow by 2030. Leadership is using current cash flow to significantly reduce debt as well. While the stock is up roughly 45% year to date, the stock still trades at less than 10-times forward earnings and sports a dividend yield of just over 2%.
Biotech and biopharma stocks have been laggards in recent weeks, with the State Street SPDR S&P Biotech ETF (XBI) down nearly 8% since August 25. That pullback has provided some lower entry points in many solid biopharma and biotech names. One name I am adding some additional exposure in ANI Pharmaceuticals (ANIP). I last teed up this small-cap biopharma as a covered-call trade idea in March. Those trades look like they are destined to expire in the money in October.
The shares have declined some 15% from their highs in July and are in the buy zone again. The company easily beat top- and bottom-line expectations when it posted its Q2 numbers on August 7. Revenues rose nearly 26% on a year-over-year basis, powered by the performance of the company’s franchise Cortrophin Gel, whose sales rose 43%. The stock is attractively valued at just over eight-times forward earnings and the company’s balance sheet is in good stead.
At the time of publication, Jensen was long ANIP, OXY and XBI.
