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Strategies & Market Trends : Dividend investing for retirement -- Ignore unavailable to you. Want to Upgrade?

To: Debt Free who wrote (3700)	2/8/2010 2:08:50 PM
From: upanddown	1 Recommendation Read Replies (2) \| Respond to of 34328

This is a good way to increase the amount of income you may receive from owing the stock. I agree and I am surprised that there is so little discussion here on using options to enhance returns on the dividend-payers favored here. Another reason for round lots is if you want to sell puts as a way to acquire the stock cheaper. I don't understand the talk here about price not being important. To me, price is always a critical issue, especially when you are talking about 2-3% yielders trading near their 52-week highs. My favorite way to establish a position would go like this. Find a dividend-paying stock you like at the current price. Sell near-the-money puts about one month forward. If you get assigned, hopefully you get it above break even (strike - premium). If it stays above the strike, you pocket the premium and repeat the process the following month. By definition, getting assigned this way means you acquired the stock on weakness. I will then wait for a rally and sell deep-in the money LEAPS against the position, at least one year forward. No chance of capital gains but I have no interest in them. The LEAP premiums reduce cost basis and increase dividend returns. Most important to me, it creates a nice cushion of downside protection. That kind of protection didn't matter when the market was surging up but it is appreciated more in the recent downturn. My CVX, which has gotten whacked recently, is still 17% above max profit and 26% above loss.