Calls and Puts for Income Message Board

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Strategies & Market Trends : Calls and Puts for Income

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From: Jerome	11/13/2013 7:36:40 AM
	Read Replies (2) of 5891

Margin costs vs dividend paying stocks. Although speculative stocks such as First Solar (FSLR), Micron (MU), and GT Technology (GTAT), pay the most in covered call premium....conservative dividend stocks such as AT & T should also be considered. T is trading at $35.00 a share. and pays a 5% dividend of $180.00 per year So..$3500 x's 7% (margin cost) is $245.00 per year. (carrying cost per year) $245.00 minus $180.00 (annual dividend) equals $65.00 actual cost of ownership. T is a rather non volatile stock and the monthly option premium is modest. In the case of T I would use options that are two months out. The Jan 36 calls are worth $44/46 per 100 shares. My observation has been that once a stock pays you a dividend, then a covered call write is just gravy. If you are able to use the same stock two or three months in a row as a covered call write....then you are doing better than 95% of the talking heads on the business channel.

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