9 Option Trades on Dividend Stocks

Equity market volatility has increased significantly since I last wrote about a covered call option strategy in July.  Using Born To Sell I have identified some potential covered call opportunities on dividend stocks that have been featured on Scott's Investments within the past month.   If you are a buy-and-hold investor comfortable holding any of the names below over the long-term but seek to increase income in the short-term, selling a covered call might be an appropriate strategy to consider.  You must also be comfortable selling the underlying stock at the strike price, thereby limiting your potential upside.


Some important notes, the first being that commissions and taxes are not included in any examples.  Second, the bid as of today's close is listed.  Finally, I prefer to sell covered calls expiring over the next 1-2 months. This allows greater flexibility and the opportunity to "roll" covered calls each month or two when the current position expires.


Yesterday I wrote an article on the dividend growth stocks Walgreen (WAG), Nordisk (NVO), and Murphy Oil (MUR).  Below are two potential trades on WAG and MUR, since NVO has a limited open interest in its options I have excluded it:

Underlying Security	Underlying Stock's Last Price	Expiration Month	Strike	Implied Volatility	Current Bid
MUR	51.54	Sept	55	37.09%	0.45
MUR	51.54	Oct	60	35.64%	0.4
WAG	35.5	Sept	37	28.68%	0.34
WAG	35.5	Oct	39	31.53%	0.51

The Dividend Champion Portfolio is a regular portfolio featuring approximately 10 of my top Dividend Champion stocks for the month.  The portfolio typically holds lower volatility stocks, so finding covered call opportunities even in today's higher volatility environment can still be challenging.  Nevertheless, below are three potential trades using stocks in this month's portfolio:

Underlying Security	Underlying Stock's Last Price	Expiration Month	Strike	Implied Volatility	Current Bid
ED	56.32	Oct	60	17.52%	0.25
KMB	68.52	Sept	70	15.80%	0.25
SYY	27.84	Oct	29	21.01%	0.35

Gold (GLD) is not a dividend stock, but it is a current holding in my ETFReplay portfolio and a popular choice among many investors. If you are a long-term gold investors looking to leverage your current position in GLD for added income, 2 trades to consider:

Underlying Security	Underlying Stock's Last Price	Expiration Month	Strike	Implied Volatility	Current Bid
GLD	179.1	Sept	185	32.61%	2.5
GLD	180.1	Oct	192	31.55	3.6

Now you can follow me on Stocktwits and Twitter!

Disclaimer: No current positions in stocks mentioned. Please note that Scott's Investments is not a financial adviser. Please consult your own investment adviser and do your own due diligence before making any investment decisions. Please read the full disclaimer at the bottom of Scott's Investments.