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Strategies & Market Trends : Option Strategies
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To: robert b furman who wrote (2316)1/19/2022 3:16:30 PM
From: Hank Scorpio  Read Replies (2) of 2591
 
I have been thinking about a dividend strategy for a while. Take one of these stocks that you own primarily/solely for the dividend income. Write deep ITM LEAP calls against the position. That takes a 7% dividend to maybe 10-15% due to Theta decay on the extrinsic. Perhaps collect another $1-2 per year per share on KMI for example.

So this juices the 'dividends' but exposes one to assignment risk, tax liability. It also provides a great deal of downside protection. I suppose one could roll forward in time whenever the extrinsic value gets below a certain point. You also don't want these options anywhere near expiry.

Anyway, something to think about. Any opinions?
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