USAC has traded very predictably around its payouts. The predominate reason for this (I think) throughout 2020 and 2021 was the uncertain ground USAC rested upon concerning the sustainability of their 14%-12% yield. There was reasonable fear they could be in breach of their debt covenants, resulting in an immediate suspension of their dividend by creditors to protect their interests. Later last year, USAC was able to re-negotiate their leverage ratio with their creditors which has caused investors to regard the yield as "safe" for another year. Personally, I like USAC's business but it's hard to ignore the old adage: "There's no such thing as low risk, high yield; only undisclosed/unrecognized risk and high yield."
Considering this, I think it's still appropriate buy puts against the underlying during the week leading up to its ex div date (still a considerable amount of time away). For now, I think the equity has gotten very far ahead of itself.
Considering this, I think it's still appropriate buy puts against the underlying during the week leading up to its ex div date (still a considerable amount of time away). For now, I think the equity has gotten very far ahead of itself.