5 Dividend-Captures With Option Trades

The Travelers Companies, Inc. (TRV)

The company was founded in 1853 and is based in New York City.

Yield: 2.85%
Dividend Amount: $0.46
Ex-Dividend Date: June 06, 2012
Beta: 0.68

Strategy: If you are bullish with The Travelers Buy the June $60.00 strike call for 20 cents over the intrinsic value. The Travelers doesn't trade ex-dividend for almost three weeks. Expected time decay is less than 15 cents. For less than a penny a day you can gain exposure to The Travelers with a maximum risk of about $4.50. If the wheels fall of Europe and the markets fall apart, buying the call options limits your risk to less than a 10% downward move compared to buying the stock outright.

Kohl's Corporation (KSS)

Kohl's Corporation operates department stores in the United States. The company was founded in 1962 and is headquartered in Menomonee Falls, Wis.

Yield: 2.66%
Dividend Amount: $0.32
Ex-Dividend Date: June 04, 2012
Beta: 0.85

Strategy:

Buy Kohl's stock and offer to sell the June $46.00 strike or lower call for 50 cents over the 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 50 cents. The most I can make is 82 cents if I hold the covered call through option expiration day and the stock gets called away.

Occidental Petroleum Corporation (OXY)

Occidental Petroleum Corporation engages in the exploration and production of oil and gas properties in the U.S. and internationally. The company operates in three segments: Oil and Gas; Chemical; and Midstream, Marketing, and Other. The company was founded in 1920 and is headquartered in Los Angeles, Calif.

Yield: 2.58%
Dividend Amount: $0.54
Ex-Dividend Date: June 06, 2012
Beta: 1.16

Strategy:

Buy Occidental Petroleum stock and offer to sell the June $75 strike call for $1 over the intrinsic value. For a more aggressive approach sell the June $80 strike call for $2.85 over the intrinsic value. Occidental appears oversold based on technical analysis. While I am long-term bearish oil, I believe the odds favor a bounce higher for Occidental.

If my shares are called away the day before trading ex-dividend (resulting from the option buyer wanting the dividend), I gain about $1 with the $75 strike and $2.85 with an $80 strike.

At the time of publication, the author held no positions in any of the stocks mentioned.

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