This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
See Cramer's multi-million dollar portfolio for FREE and get his new book Get Rich Carefully! Learn More

7 Dividend Captures Using an Option Hedge

Oceaneering International (OII)
Yield: 1.46%
Dividend Amount: $0.18
Ex-Dividend Date: May 30, 2012
Beta: 1.55

Strategy: Buy Oceaneering International stock and offer to sell the June $50.00 strike or lower call for $2.82 over the intrinsic value.

I will look to close out the covered option with a gain of about $1.03, plus the dividend received. I don't want the option hedge unless the sale will provide at least the minimum $2.82 over intrinsic value.

If my shares are called away the day before trading ex-dividend (resulting from the option buyer wanting the dividend), I gain about $2.82. The most I can make is $3.00, if I hold the covered call through option expiration day and the stock gets called away.

PepsiCo (PEP)
Yield: 3.22%
Dividend Amount: $0.54
Ex-Dividend Date: May 30, 2012
Beta: 0.49

Strategy: Buy PepsiCo stock and offer to sell the June $65.00 strike or lower call for 36 cents over the intrinsic value. I will attempt to close out the trade with a gain of near 11 cents, plus the dividend earned.

Kellogg Company (K)
Yield: 3.38%
Dividend Amount: $0.43
Ex-Dividend Date: May 30, 2012
Beta: 0.45

Strategy: Buy Kellogg Company stock and offer to sell the June $50.00 strike or lower call for 44 cents over the intrinsic value.

The option may get exercised early for a gain. In almost all cases, I sell the call option first to ensure the stock option leg is complete. If not, after qualifying for the dividend, I will attempt to close out the trade with a gain of near 13 cents, plus the dividend earned.

In June, Rocco Pendola and I will have a live Webinar and I will demonstrate how to initiate a dividend capture trade. Details are on my blog and Rocco's newsletter page.

Stock quotes in this article: QCOM, EXPD, IBN, SLB, OII, PEP, K 
At the time of publication, Weinstein held no positions in equities mentioned in this piece.

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

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.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

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.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
DOW 16,408.54 -16.31 -0.10%
S&P 500 1,864.85 +2.54 0.14%
NASDAQ 4,095.5160 +9.2910 0.23%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto
Advertising Partners

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters