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Strategies & Market Trends : How To Write Covered Calls - An Ongoing Real Case Study!
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To: James F. Hopkins who wrote (12816)5/28/2000 4:44:00 AM
From: Richard James  Read Replies (1) of 14162
 
James P. Hopkins: Your dividend capture plan intrigues me. I am going to take a good look into it, but first wish to make sure I understand it by example. I buy 1000 MO at 27 and sell JAN01 $10 calls for 17.5. MO has a dividend rate of $1.92 per share, but since my basis is reduced to 9.5, my effective yield per annum is 1.92/9.5 or 20.21%.

Question: Would the sale of such deep in the money covered calls trigger a constructive sale for taxes? Plan to use this strategy in my IRA, but may also give it a play in my taxable account.

Question: Does anything stop the call from being exercised just before the record date, in which case I lose the dividend? Is it just not very likely to happen as the owner is likely to wait until expiry to do so?

Thanks for sharing this.
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