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Covered calls on dividend-paying stocks

Covered calls on dividend-paying stocks

The pros and cons of selling covered calls on dividend paying stocks. Selling Covered Calls is a strategy in which an investor sells a call option contract while at the same time owning an equivalent number of shares in the underlying stock. It is considered to be one of the safest option strategies in the market. One day before the ex-dividend date, XYZ stock is trading at $50 while a DEC 40 call option is priced at $10.20. An options trader decides to play for dividends by purchasing 100 shares of XYZ stock for $5000 and simultaneously writing a DEC 40 covered call for $1020. Here is a criteria for screening for your covered call stock list: Input stocks that pay a dividend. Ensure the stock is reasonably valued at less than 15x P/E ratio and less than 10x EV/EBITDA. Make sure that you understand the business model of the company and how they make money. Follow the The 3 Best Covered Calls on Blue-Chip Stocks Here's how you can generate blue-chip income without relying on dividends By Lawrence Meyers, InvestorPlace Contributor Feb 15, 2018, 10:47 am EDT The covered call strategy works best on stocks where you do not expect a lot of upside or downside. Essentially, you want your stock to stay consistent as you collect the premiums and lower your Covered calls can be combined with dividend-paying stocks to increase the amount of income from the position. You do not have to use your entire position. If you have 1000 shares of The Option Prophet (sym: TOP) that are paying a nice dividend, you may not want to write calls on the entire position.

Covered calls written against dividend paying stocks are especially vulnerable to early assignment. Corporate events. When companies merge, spin off, split, pay special dividends, etc., their options can become very complicated.

Using a covered call strategy can be an effective way to boost your monthly income on your dividend growth stocks. It is a relatively safe way to earn additional income on your investments while protecting potential downside risk. Let’s dig into the best stocks for covered call writing. If you have chosen to sell covered calls on a dividend-paying stock position and the options are ITM as the ex-dividend date approaches, you can sometimes avoid having your stock called away and losing your dividend, by buying back the covered calls before the ex-dividend date.

The 3 Best Covered Calls on Blue-Chip Stocks Here's how you can generate blue-chip income without relying on dividends By Lawrence Meyers, InvestorPlace Contributor Feb 15, 2018, 10:47 am EDT

Here is a criteria for screening for your covered call stock list: Input stocks that pay a dividend. Ensure the stock is reasonably valued at less than 15x P/E ratio and less than 10x EV/EBITDA. Make sure that you understand the business model of the company and how they make money. Follow the The 3 Best Covered Calls on Blue-Chip Stocks Here's how you can generate blue-chip income without relying on dividends By Lawrence Meyers, InvestorPlace Contributor Feb 15, 2018, 10:47 am EDT The covered call strategy works best on stocks where you do not expect a lot of upside or downside. Essentially, you want your stock to stay consistent as you collect the premiums and lower your Covered calls can be combined with dividend-paying stocks to increase the amount of income from the position. You do not have to use your entire position. If you have 1000 shares of The Option Prophet (sym: TOP) that are paying a nice dividend, you may not want to write calls on the entire position. Our High Dividend Stocks by Sector Tables list high dividend paying stocks in each sector. Follow our Dividend Stocks Blog articles to f ind new income-producing strategies, with free dividend stocks picks and high yield options trades. Our Covered Calls Table has over 30 current high yield covered call trades. Covered calls written against dividend paying stocks are especially vulnerable to early assignment. Corporate events. When companies merge, spin off, split, pay special dividends, etc., their options can become very complicated. You’re in the process of building an income portfolio of blue-chip, dividend paying stocks and thought the tech bellwether would be a great addition. But you also intend to create additional income on your basket of low-volatility, blue-chip stocks by selling covered calls and Microsoft is the perfect candidate. Let’s assume you paid today’s price of $39, or $3900 for 100 shares of the stock.

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