Does anyone here do the above trades on some dividend stocks with yield in the 6 to 10 percent area and zero risk. Buy a near term collar with calls and puts at same price and collecting dividend?
Example; today bought TD for 59.55 and sold 60 call for .98 expiring 4/17 for 1.43 gain. At same time bought 4/17 60 put for 1.80. I will get 1.05 dividend on 4/10. Total gain is .63 with zero risk. total invested is 60.37 . dividing .63 by 60.37 is 1.04 percent over 30 days for total annual yield of 12.5 percent. ZERO RISK.
It’s not riskless. 1. you opportunity cost of 30 cents from financing. 2. you might be early exercised and miss the dividend. And then you have lost 45 cents and the opportunity cost.
i found from prior trades it will not be early exercise and it would be too much of a loss for the call option holder. with the large premium and short expiration. I sell covered calls above the stock price. Works every time
i found from prior trades it will not be early exercise and it would be too much of a loss for the call option holder. with the large premium and short expiration. I sell covered calls above the stock price. Works every time
Here's how this trade works: you pay 82 cents for the options you pay 59.55 for the stock you will pay about 20 cents in carrying the stock. (if you didn't do this trade, you could invest in a treasury and earn that 20 cents). you will sell the stock at 60 (making 45 cents). so you pay 1.02 (including the opportunity cost of owning the risk free treasury instead) and get back 1.05 in dividends and receive 45 cents on the assignment. If the stock is > 63 just before the ex-date, you will be assigned and won't receive the dividend and thus will pay 1.02 and receive 45 cents losing 57 cents net. if you get the div you will make like 48 cents, if you are assigned early you will lose 57 cents.
try as i might, i could figure out how you got your figures and reasoning. could not tell if you giving a trade example , buying a treasury or a combo.