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

To: Wowzer who wrote (3722)	2/9/2010 2:12:34 PM
From: Triffin	Read Replies (1) \| Respond to of 34328

RE: Options on dividend paying stocks .. If there's a dividend paying stock that I'm willing to buy at the current price, I always check if there's an OTM ( out of the money ) PUT that I can sell that's currently bid for more than the dividend that the stock pays .. For example .. I'm willing to buy EXC @ 44 for it's $2.10 dividend Checking the option tables I see that I can sell the JAN 40 PUT for 2011 @ 3.30 BID The $3.30 I collect now in PUT premium is more than the annual dividend and, if the stock closes below $40.00 in Jan 2011 I'll own EXC at $36.70 then, rather than for $44.00 now .. ====== I also prefer to buy PUTs rather than sell CALLs to hedge an existing position for a couple of reasons .. 1) PUTS protect the downside but allow me to participate on any further upside in the stock if I guessed the future stock direction incorrectly 2) I'll continue to collect any dividends payable on the underlying stock with no risk of having my stock called away as would occur had I hedged with short ITM ( in the money ) CALLs .. Lots of ways to skin a cat, but the above works for me .. Triff ..