With shares trading near my purchase price of $108.82, today seemed like a good time to make a new high-yield trade with Disney (DIS).
My trade involved selling one September 21, 2018 $110 call for $3.00 per share.[hana-code-insert name=’adsense-article’ /]I sold this call on the 100 shares I originally purchased at $108.82 per share during a high-yield trade I made back in August 2015.
The call option I sold on my original trade ended up expiring… so I sold another call option in December 2017.
That call option just expired on June 15, so my latest trade simply involves selling yet another call option on these same 100 shares.
Every time you’re able to sell an option like this, you generate additional income.
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: DIS stays under $110 by September 21
If DIS stays under $110 by September 21 I’ll get to keep my 100 shares.
In the process, I’ll also have received $300 in call income ($3.00 x 100 shares).[hana-code-insert name=’adsense-article’ /]The call income — known as a “premium” in the options world — was collected instantly this morning.
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 $294.40 in profit after commissions.
On a percentage basis, I received an instant 2.8% yield for selling the call ($3.00 / $108.82).
When I subtract out the commissions I’m looking at a 2.7% yield in 95 days… which works out to a 10.4% annualized yield.
Scenario #2: DIS climbs over $110 by September 21
If DIS climbs over $110 by September 21, my 100 shares will get sold (“called away”) at $110 per share.
In “Scenario 2″ — like “Scenario 1″ — I get to keep the $300 in call income ($3.00 x 100 shares). I’ll also generate $118 in capital gains ($1.18 X 100) because I bought at $108.82 and will be selling at $110.
In this scenario, after commissions I’ll be looking at a $407.45 profit.
From a percentage standpoint, this high-yield trade will deliver an instant 2.8% yield for selling the call ($3.00 / $108.82) and a 1.1% gain ($1.18 / $108.82).
After subtracting out the commissions, I’m looking at an 3.7% total return in 95 days.
That works out to a 14.4% annualized yield from DIS.
P.S. The reason I’ve gone public with many of my real-life, real-money “High-Yield 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’ /]