Dividends

[leftovers]

I am doing this in my IRA and personal account. Yes the stock price drops the dividend amount but that is exactly why I am doing it so I can lock in that dip recovery and move on to the next trade!

I just recently bought CVS for the .50 dividend . My purchase price was 53.75 right after I made the purchase I sold a covered call with a 53 strike price for a credit of 1.80 so my ultimate sales price will be 54.80 when the stock is assigned plus I will be receiving the dividend of .50.


I sold the May 17 contract so in 16 days I have my money and dividend and ready for the next dividend capture. With CVS I see now I could have bought the weekly and been out sooner but I don't know if the credit would of been the same.


In the case here CVS has recovered and might go a little higher but I am happy to see the quick trade and collect the dividend.


I see two down sides on this. One is they can call the stock before Xdate but if it is short term and only one strike in the money the odds are low. Most people trade options for the option price increase not the dividend. Two the stock price could drop dramatically but you have a buffer and will receive the credit to lower your cost basis of the stock.


I am doing this with 2 positions so I can rotate in and out to collect quarterly dividends every month and sometimes it even works out to 2 times a month. so far my success rate is 90% much higher than the standard dividend capture rotation of less than 50%.