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Reynolds American, through its subsidiaries, manufactures and sells cigarette and other tobacco products in the U.S.
Yield: 5.83% Dividend Amount: $0.59 Ex-Dividend Date: June 07, 2012 Beta: 0.57
Strategy: Buy Reynolds American stock and offer to sell the June $40.00 strike or lower call for 53 cents over the intrinsic value. I will look to close out the covered option with a gain of about 14 cents, plus the quarterly dividend paid by the company.
Large yield stocks like Reynolds at 5.83%, often attract a lot of interest in dividend capturing, so the option premium may be hard to get. If my shares are called away the day before trading ex-dividend (resulting from the option buyer wanting the dividend), I gain about 53 cents. The most I can make is $1.12 if I hold the covered call through option expiration day and the stock gets called away.
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