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Why are you selling the 30 calls? T is @ 33.xx, are you thinking the premium is the only insulator against getting assigned?
This is a conservative trade. Major support last 5 years is 32. 2% premium assures a satisfactory annualized yield no matter when/if stock is called before expiration. Every quarter stock not called adds another 1.6% of profit based on .49 dividend.
With some of my play money I am going to initiate a buy/write on T selling 1/18/19 30 calls. Worse case scenario is I own stock at expiration with cost basis of around 27.40 including dividends. Yield on cost basis moving forward is 7.15%. If stock called anytime before expiration will be satisfied with collecting 2% option premium plus any dividends. Not swinging for the fences on this one.
The actual worse case scenario is you hold worthless shares
Not only was your worse case scenario off you could be up a mere 65cents per share before transaction costs and tax issues. That is if your strike was 30 and a net cost of 29.65. Not to mention you neglected to account for the dividend properly when attempting to calculate profit
Not only was your worse case scenario off you could be up a mere 65cents per share before transaction costs and tax issues. That is if your strike was 30 and a net cost of 29.65. Not to mention you neglected to account for the dividend properly when attempting to calculate profit
Well it's not profit in and of itself so your assumed calculation is flawed. You would need price appreciation equal to or greater than the dividend. Absent that your stock price would decline exactly by the amount of the dividend so it wouldn't be a profit at all.
Well it's not profit in and of itself so your assumed calculation is flawed. You would need price appreciation equal to or greater than the dividend. Absent that your stock price would decline exactly by the amount of the dividend so it wouldn't be a profit at all.
the paying of a dividend is a neutral event if you reinvest it or it is taking money out of the investment if you don't .
imagine having a 100k in a stock paying 5%.so the night before the dividend you have have 100k , the next morning you have 5k in pocket and all exchange computers reduce the value of your holdings automatically before the open by the same amount .
so now you have 95k left compounding for the market to work on . if you reinvest you have the same100k compounding for you .
it is the appreciation in the stock that actually gives you your gain in all cases . the dividend is just them giving you back a piece of your investment the same as drawing the same dollars from a portfolio on your own .
drawing 5% from a non dividend portfolio that went up 5% as an example is the same as a 5% dividend from a stock that went up 5% in total return .
in both cases if you don't see at least 5% in return you have zero gain for the year and have the same or less than you did the start of the year . .
this is basic stuff!
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