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

To: Chris Forte who wrote (3744)	2/11/2010 3:25:03 PM
From: chowder	Read Replies (1) \| Respond to of 34328

Re: KO Options ...... I don't use options because I haven't studied the various strategies enough to use them and feel comfortable knowing I'm using the correct tactics. So, this may be a stupid question, but a question none the less. :o) Wouldn't the strategy you are employing with KO be better in a situation where you already owned KO and were wanting to add to the position? It seems to me, there's a chance you may not get to own it. After identifying a good long term investment, one that continues to grow their dividends, and then not owning it because price didn't come down far enough, sounds like a risk not worth taking in my opinion. Again, I don't understand option strategies and maybe I'm not looking at it correctly. If you wish to own KO in the future because it never came back down to your price level, then you lose the dividends, the lower price you could have owned it at and the compounding component of reinvesting the dividends. If you already owned a position and wanted to add to it by dollar cost averaging, then the tactic you are employing at the moment sounds like a good one. Am I making any sense? Anyone have any opinions on this?

To: Chris Forte who wrote (3744)	2/11/2010 3:29:03 PM
From: upanddown	Read Replies (1) \| Respond to of 34328

Chris The 50's are fine. I would have preferred to sell on a deeper down day but you did get them on the early dip before a nice bounce in KO. One problem with low premiums is that you tend to pay a higher percentage of the put proceeds in commissions. You are paying a little over 6% while I try to stay under 3% but it is not that important. When there is a ex-div date between your put sale date and the expiration date, the dividend tends to inflate the put price since there is a coming .41 downward revision to KO which makes the put more valuable. In other words, you would not have gotten .43 selling KO puts 7% out of the money and 36 days forward unless there was a dividend before expiration. The put buyer (always try to understand the strategy of the person on the other side) may well be a KO long who wants to buy some downside protection and is financing your .43 premium with the .41 div due before expiration. John