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





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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.


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