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There are many dividend capturing strategies, and I have used more than one. In this article we will go over a few stocks that have upcoming dividends that can be captured at a minimum amount of risk. The criteria that I use is that I must be able to sell a call option in either the front, or first back month that is in the money, and with enough premium that I will not mind getting exercised early (which happens often and can be a good thing if the trades are executed correctly).

This is one of my favorite and easy to understand methods of making gains through options and dividends. Although much of the gains will come from dividends, it should be noted in my experience, the option decay can provide a greater return. This is especially true in lower yielding stocks.

CenturyLink, Inc. (CTL) Yield: 8.42%

  • Dividend Amount: $0.72
  • Ex-Dividend Date: September 01, 2011
  • Beta: 0.74

Strategy:

In combination with buying the stock, sell the $34.00 strike call for $0.35 over the intrinsic value. The option may get exercised early for a gain. If not, after qualifying for the dividend, offer to cover position with a premium of $0.31 over intrinsic value.

Looking at the price movement over the last month, the stock has fallen in price -7.19 %, with a one year change of -4.33%.
Comparing to the S&P 500 price changes, the price performances are 1.92% vs. the S&P 500 from a month ago, and year to date difference is -20.28% vs. the S&P 500 price change.

Waste Management, Inc. (WM) Yield: 4.19%

  • Dividend Amount: $0.34
  • Ex-Dividend Date: September 1, 2011
  • Beta: 0.58

Strategy:

In combination with buying the stock, sell the $27.00 strike call for $0.47 over the intrinsic value. The option may get exercised early for a gain. If not, after qualifying for the dividend, offer to cover position with a premium of $0.44 over intrinsic value.

In the last month, the stock has decreased in price -0.61 %, with a one year change of -1.93%.
Comparing to the S&P 500 price changes, the price performances are 11.51% vs. the S&P 500 from a month ago, and year to date difference is -4.44% vs. the S&P 500 price change.

NIKE, Inc. (NKE) Yield: 1.44%

  • Dividend Amount: $0.31
  • Ex-Dividend Date: September 1, 2011
  • Beta: 0.90

Strategy:

In combination with buying the stock, sell the $82.50 strike call for $1.54 over the intrinsic value. The option may get exercised early for a gain. If not, after qualifying for the dividend, offer to cover position with a premium of $1.51 over intrinsic value.

In the last month, the stock has decreased in price -4.28 %, with a one year change of 22.59%.
Comparing to the S&P 500 price changes, the price performances are 5.12% vs. the S&P 500 from a month ago, and year to date difference is 7.96% vs. the S&P 500 price change.

Bob Evans Farms, Inc. (BOBE) Yield: 3.27%

  • Dividend Amount: $0.25
  • Ex-Dividend Date: September 1, 2011
  • Beta: 0.86

Strategy:

In combination with buying the stock, sell the $30.00 strike call for $0.65 over the intrinsic value. The option may get exercised early for a gain. If not, after qualifying for the dividend, offer to cover position with a premium of $0.62 over intrinsic value.

Looking at the price movement over the last month, the stock has fallen in price -11.88 %, with a one year change of 20.31%.
Comparing to the S&P 500 price changes, the price performances are -1.13% vs. the S&P 500 from a month ago, and year to date difference is 0.78% vs. the S&P 500 price change.

Coach, Inc. (COH) Yield: 1.64%

  • Dividend Amount: $0.23
  • Ex-Dividend Date: September 1, 2011
  • Beta: 1.58

Strategy:

In combination with buying the stock, sell the $48.00 strike call for $0.54 over the intrinsic value. The option may get exercised early for a gain. If not, after qualifying for the dividend, offer to cover position with a premium of $0.51 over intrinsic value.

Looking at the price movement over the last month, the stock has fallen in price -15.18 %, with a one year change of 49.37%.
Comparing to the S&P 500 price changes, the price performances are -6.85% vs. the S&P 500 from a month ago, and year to date difference is 5.81% vs. the S&P 500 price change.

Nordstrom, Inc. (JWN) Yield: 2.19%

  • Dividend Amount: $0.23
  • Ex-Dividend Date: September 1, 2011
  • Beta: 1.73

Strategy:

In combination with buying the stock, sell the $38.00 strike call for $0.64 over the intrinsic value. The option may get exercised early for a gain. If not, after qualifying for the dividend, offer to cover position with a premium of $0.61 over intrinsic value.

In the last month, the stock has decreased in price -16.09 %, with a one year change of 39.42%.
Comparing to the S&P 500 price changes, the price performances are -7.85% vs. the S&P 500 from a month ago, and year to date difference is 6.15% vs. the S&P 500 price change.

Realty Income Corp (O) Yield: 5.17%

  • Dividend Amount: $0.14
  • Ex-Dividend Date: September 1, 2011
  • Beta: 0.79

Strategy:

In combination with buying the stock, sell the $30.00 strike call for $0.21 over the intrinsic value. The option may get exercised early for a gain. If not, after qualifying for the dividend, offer to cover position with a premium of $0.18 over intrinsic value.

The stock has moved higher in price 3.64 %, with a one year change of 3.89%.
Comparing to the S&P 500 price changes, the price performances are 13.82% vs. the S&P 500 from a month ago, and year to date difference is 5.12% vs. the S&P 500 price change.

Sara Lee Corp. (SLE) Yield: 2.62%

  • Dividend Amount: $0.12
  • Ex-Dividend Date: September 1, 2011
  • Beta: 0.85

Strategy:

In combination with buying the stock, sell the $17.00 strike call for $0.29 over the intrinsic value. The option may get exercised early for a gain. If not, after qualifying for the dividend, offer to cover position with a premium of $0.26 over intrinsic value.

In the last month, the stock has decreased in price -8.11 %, with a one year change of 19.95%.
Comparing to the S&P 500 price changes, the price performances are 0.91% vs. the S&P 500 from a month ago, and year to date difference is 7.18% vs. the S&P 500 price change.

Stage Stores, Inc. (SSI) Yield: 2.32%

  • Dividend Amount: $0.09
  • Ex-Dividend Date: September 1, 2011
  • Beta: 1.72

Strategy:

In combination with buying the stock, sell the $15.00 strike call for $0.75 over the intrinsic value. The option may get exercised early for a gain. If not, after qualifying for the dividend, offer to cover position with a premium of $0.72 over intrinsic value.

In the last month, the stock has decreased in price -12.92 %, with a one year change of 37.29%.
Comparing to the S&P 500 price changes, the price performances are -4.37% vs. the S&P 500 from a month ago, and year to date difference is -4.47% vs. the S&P 500 price change.

EarthLink, Inc. (ELNK) Yield: 2.82%

  • Dividend Amount: $0.05
  • Ex-Dividend Date: September 1, 2011
  • Beta: 0.92

Strategy:

In combination with buying the stock, sell the $6.00 strike call for $1.12 over the intrinsic value. The option may get exercised early for a gain. If not, after qualifying for the dividend, offer to cover position with a premium of $0.70 over intrinsic value. This one is more of an option premium gain with the dividend as a bonus.

In the last month, the stock has decreased in price -11.82 %, with a one year change of -16.98%.
Comparing to the S&P 500 price changes, the price performances are -3.16% vs. the S&P 500 from a month ago, and year to date difference is -11.89% vs. the S&P 500 price change.

Remember, you must buy a stock at least three business days before the record date (at least one business day before the ex-dividend date) to qualify for a dividend.

My last step (completed before making a trade on the same day) is to check company announcements, and news sources for possible events that may cause the stock price to move. This is especially important during earnings season.

I research the different call options and calculate the expected probabilities based on Beta, Bid, Offer, Volume traded the current day, open interest, and time value / implied volatility. The Options offer some level of protection from down moves in the stock, and provide revenue to cover the times that the options do not fully cover down moves in the stock. Income is not needed from the option Premiums, so a break even from premiums received/stock losses ratio is a win.

I use a proprietary blend of technical analysis, financial crowd behavior, and fundamentals in my short-term trades, and while not totally the same in longer swing trades to investments, the concepts used are similar. Nothing in the article should be considered investment advice, but you may want to use this article as a starting point of your own research with your financial planner. I use Seeking Alpha, Edgar Online, Google Finance, MSN Money, cnbc.com, Zacks and Yahoo Finance for most of my data.

Source: Using Options To Capture Dividends: Ex-Dividend Sept. 1, 2011