If my shares are called away before trading ex-dividend (resulting from the option buyer wanting the dividend), I gain about 55 cents. The most I can make is $1.32 if I hold the covered call through option expiration day and the stock gets called away. I expect the shares to get called away as long as the option remains in the money.
Background: Coca-Cola, a beverage company, engages in the manufacture, marketing and sale of nonalcoholic beverages worldwide. The company primarily offers sparkling beverages and still beverages.Yield: 2.77% Dividend Amount: 26 cents Ex-Dividend Date: Nov. 28 Beta: 0.51 Strategy: Buy Coca-Cola stock and offer to sell the December $35.00 strike or lower call for 21 cents over the intrinsic value. I will attempt to close out the trade with a gain of near 16 cents, plus dividend. If my shares are called away before trading ex-dividend (resulting from the option buyer wanting the dividend), I gain about 21 cents. The most I can make is 47 cents if I hold the covered call through option expiration day and the stock gets called away. The payout rate of the dividend is about 50% of this fiscal year's earnings and slightly less for next year's estimated earnings. The dividend has increased steadily, even during the financial meltdown in 2009.
CSX (CSX - Get Report) Background: CSX, together with its subsidiaries, provides rail-based transportation services. It offers traditional rail service and the transport of intermodal containers and trailers. Yield: 2.7% Dividend Amount: 14 cents Ex-Dividend Date: Nov. 28 Beta: 1.24 Strategy: CSX is a different type of dividend trade. It's not worth selling a covered call because the option premium is only about five cents. But lack of option premium doesn't mean we can't profit from the upcoming ex-dividend date. The rules of this trade are much different because it only makes sense if you are already bullish and want to buy CSX. Instead of buying CSX directly, buy the December $17.50 strike call for five cents above intrinsic value.