NEW YORK ( TheStreet) -- If you take a look, you will find lots of companies worth owning with quarterly dividends. As you know, dividends can be a wonderful source of investor revenue. With each dividend payment received, investors are able to lower their risk in an investment.
With my portfolio, although much of the gains will come from dividends, the option decay will provide a big part of my gains. Option decay, or Theta, is the loss in time premium between two dates. This is especially true in lower-yielding stocks, since higher-yield options have lower-time premiums, all else being equal.
If you understand what you just read, advance to the next paragraph. If not, read this: Let's say I write an option today to you for $1 with an expiration in two months. After one month, you would expect the value to drop in half (not actually, but you get the idea). If I write a covered with 30 cents in time premium and the option buyer exercises the option in front of the ex-dividend date, I get to keep the time premium paid (because the buyer is exercising). Also, the longer I maintain a covered-call position (like two weeks with a front month option, for example) the lower the time premium is worth (all else being equal).
Xcel, through its subsidiaries, engages in the generation, purchase, transmission, distribution and sale of electricity in the United States. The company was founded in 1909 and is headquartered in Minneapolis, MN.
Dividend Amount: 27 cents
Ex-Dividend Date: June 19, 2012
Heinz manufactures and markets food products for consumers as well as food-service and institutional customers in North America, Europe, the Asia Pacific and other international markets. The company was founded in 1869 and is based in Pittsburgh, PA.
Dividend Amount: 52 cents
Ex-Dividend Date: June 20, 2012
Beta: 0.53 Strategy: Unlike the others, Heinz offers an even better strategy for trend followers than a dividend capture. The dividend influences the option price, allowing a low-risk method to catch the rising trend. I like buying the June $50 strike call for 10-15 cents over the intrinsic value. With the June expiration date approaching, June will become the front month. Heinz has about three weeks to continue higher with a total time decay cost of about 10 cents before trading ex-dividend. If Heinz does fall or crash, the most at risk is about $3.60.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV