VZ pays $1.95 dividends, that’s over 5% with today’s price of 37.75. I was thinking about putting cash into something that pays more the themeager 1% interest in the bank.
I bought 1000 shares of VZ, and to make it risk free, I bought Jan 12 37 puts for 3.10, and sold Jan 12 37 calls for 2.71 to offset the cost. That’s $.39/shr out of pocket premium. At expiration I have to sell the shares at 37, so that’s additional $.75/shr capital loss. So subtract $.39 and $.75 from the $1.95 dividend yields $.81 net dividend, excluding commissions. That’s about 2.1% yield.
Nice theoretical exercise, but in reality I made some careless error!
- I just missed the April 6 ex-dividend date by a week!!
- The option expiration is Jan 12, that’s less than a full year!
So, I’d probably get only 2 dividend payments may be 3, meaning, the yield will be about 1% to 1.5%. A bit of a waste of time, but a lesson learned.