With shares trading near my purchase price of $36.02 it seemed like a good time to make a new “10% Trade” with Intel (INTC).
I made the trade yesterday, and it involved selling two October 20, $36.00 covered calls for $1.80 per share.
I sold these calls on the 200 shares that I had purchased for $36.02 per share during a previous “10% Trade”.
The previous calls I sold expired worthless less than two weeks ago so I’m simply selling another round of calls on those same shares.
There are likely two ways this new trade will work out — and they both spell at least double-digit annualized yields on my purchase price…
Scenario #1: INTC stays under $36.00 by October 20
If INTC stays under $36.00 by October 20 I’ll get to keep my 200 shares.
In the process, I’ll also have received $360 in covered call income ($1.80 x 200 shares).[hana-code-insert name=’adsense-article’ /]The covered call income — known as a “premium” in the options world — was collected instantly yesterday.
It was deposited in the account where I made the trade, which is my 401k retirement account.
At the end of the day, if “Scenario 1″ plays out I’ll be looking at $353.75 in profit after commissions.
On a percentage basis, I received an instant 5.0% yield for selling the covered calls ($1.80 / $36.02).
When I subtract out the commissions I’m looking at a 4.9% yield in 143 days… which works out to a 12.5% annualized yield.
Scenario #2: INTC climbs over $36 by October 20
If INTC climbs over $36.00 by October 20 my 200 shares will get sold (“called away”) at $36.00 per share.
In “Scenario 2″ — like “Scenario 1″ — I get to keep the $360.00 in covered call income ($1.80 x 200 shares). I’ll also generate a $4.00 loss (-$0.02 X 200) because I bought at $36.02 and will be selling at $36.00.
In this scenario, after commissions I’ll be looking at a $341.56 profit.
From a percentage standpoint, this “10% Trade” will deliver an instant 5.0% yield for selling the covered calls ($1.80 / $36.02) and a 0.1% loss (-$0.02 / $36.02).
After subtracting out the commissions, I’m looking at a 4.7% total return in 143 days.
That works out to a 12.1% annualized yield from INTC.
P.S. The reason I’ve gone public with many of my real-life, real-money “10% Trades” is so you can see for yourself how entirely possible it is to boost your annualized yield on high-quality dividend growth stocks. Just keep in mind that these trades aren’t intended to be specific recommendations for you as an individual. Everyone has different financial situations, risk tolerance, goals, time frames, etc.[hana-code-insert name=’MMPress’ /]