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5 Dividend-Captures With Option Trades

The Travelers Companies, Inc. (TRV - Get Report)

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 - Get Report)

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 - Get Report)

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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SYM TRADE IT LAST %CHG
ADP $86.03 0.00%
CXW $36.64 0.00%
KSS $73.09 0.00%
OXY $80.50 0.00%
TRV $102.12 0.00%

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S&P 500 2,108.29 +22.78 1.09%
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