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-Capture Ideas Using an Option Hedge

Digital Realty Trust (DLR)

Digital Realty provides a wide range of data center solutions and consultation, including building, buying, managing, and data center outsourcing services.

   Yield: 4.19%
   Dividend Amount: 73 cents
   Ex-Dividend Date: June 13, 2012
   Beta: 1.06

Strategy: Buy Digital Realty Trust stock and sell the June $70.00 strike or lower call for $1.46 over the intrinsic value. I will look to close out the covered option with a gain of about 65 cents, plus the quarterly dividend paid by the company.

The most I can make is $2.19 if I hold the covered call through option expiration day and the stock gets called away.

 T. Rowe Price Group (TROW)

 T. Rowe Price Group, Inc. is a publicly owned asset management holding company.

   Yield: 2.34%
   Dividend Amount: 34 cents
   Ex-Dividend Date: June 12, 2012
   Beta: 1.61

Strategy: Buy TROW stock and sell the June $50.00 strike or lower call for 56 cents over the intrinsic value.

The option may get exercised early for a gain. If not, after qualifying for the dividend I will attempt to close out the trade with a gain of near 20 cents, plus dividend.

If my shares are called away before trading ex-dividend (resulting from the option buyer wanting the dividend), I gain about 56 cents. The most I can make is 90 cents if I hold the covered call through option expiration day and the stock gets called away.

   Eastman Chemical (EMN)

 Eastman Chemical, a chemical company, engages in the manufacture and sale of chemicals, plastics, and fibers.

   Yield: 2.27%
   Dividend Amount: 26 cents
   Ex-Dividend Date: June 13, 2012
   Beta: 1.97

Strategy: Buy Eastman Chemical stock and sell the June $35.00 strike or lower call for 75 cents over the intrinsic value. I will attempt to close out the trade with a gain of near 32 cents, plus dividend.

   XL Group (XL)

 XL Group, through its subsidiaries, provides insurance and reinsurance.

   Yield: 2.16%
   Dividend Amount: 11 cents
   Ex-Dividend Date: June 13, 2012
   Beta: 2.43

Strategy: Buy XL Group stock and sell the June $20.00 strike or lower call for 60 cents over the intrinsic value. I will attempt to close out the trade with a gain of near 26 cents, plus dividend.

If my shares are called away before trading ex-dividend (resulting from the option buyer wanting the dividend), I gain about 60 cents. The most I can make is 71 cents if I hold the covered call through option expiration day and the stock gets called away.

Stock quotes in this article: ARCC, DLR, TROW, EMN, XL, CMA, MSI, ECL 

Select the service that is right for you!

COMPARE ALL SERVICES
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 Bankrate.com

  • 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
Top Rated Stocks Top Rated Funds Top Rated ETFs