Tuesday, May 31, 2011


One of the complaints of DITM is that it works less well in upwardly moving stocks - au contraire!
I bot MCD in Feb. for $62 and sold the Sept.72 1/2 call. After getting 1 dividend, since it had risen to 81, it was called away in May (3 months later). Annualized profit: 10.35%.
Since I am constantly tweaking DITM ( it's now on a 12% course for 2011), I was reading Steven Sears option column in Barron's this weekend about naked puts on stocks you wish to own. I got to thinking -what if you find a stock you like but the ex-D date is 2-3 months away? Why not sell a put past the ex-D date? If it is put to you, fine - you own the stock and get the dividend; if called away, it is done in a compressed timeframe embellishing your premium.
I'm considering the DIA for Aug. ; since the dividend varies due to 30 components, some months are better than other - Aug., Nov., Jan., May -so why not capture them? Also , it pays a special yearend dividend in Dec. (At least it has done so recently).

No comments:

Post a Comment