How to Capture a DIVIDEND in ONE DAY With Little Risk
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- เผยแพร่เมื่อ 30 ก.ย. 2024
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This strategy doesn’t seem to work anymore since options premiums are low now
Nothing works anymore, anything works a few times then one bad trade erases everything
Hey ive tried back testing this strategy but its very hard to find an ITM call that pays more than the width of the strikes because if your shares are called away and your premium collected is less than the strike you will loose money. So is it better to sell further out in time and then just close off the position the next day? Also are you selling ITM options at a 1.00 delta to take advantage of the down side? Or do you just look at the premium collect. Thanks for your input!
This is awesome. Thank you for the this Shibab!
not awesome for me today, AXP is at 74
Great video! I have always considered purchasing stocks before the Dividend EX date! There is always a little bit of risk, because the stock drops by the amount of that dividend so theres not as much of a margin to pick up. Plus you have to pay taxes on the dividend.
Exactly, thats where the sold call option helps, but it could still drop below all that
this strategy can be useful to be used on Preferred stocks and ones with high hield, If you can get a stock with 5 to 10% yield, and then buy the preferred stock which does not usually gain on value but only dividends, then you would be safe getting out of the trade the next day, don't you think so?
would have to test it, any example of a preferred stock?
So you bought 100 shares of AXP ($7900 USD) so you can collect $39?
After paying commissions and tax, it would be around ~$13 ($10 buy&sell stock fee + $10 option fee, and 30% margin tax depending on your tax bracket)
It looks too risky for me for such a small profit.
or am I missing something?
And a bit of call premiums, 140$, in one day though, but didnt happen cause axp fell hard today
My commissioms are 5.75 in and 5.75 out, but i have myself some room for premium profiting as well
Hi Shihab, Thanks for all your videos! I just came across this video from 2 years ago. At one point (about 10:20 minutes) you say that in order to avoid early assignment of an ITM covered call, one should look at the price of the Put option corresponding to the covered call's strike, ie, if the corresponding Put's price is higher than the amount of the dividend, then the CC is stock unlikely to be called away early. I am curious about how this works. What's the relationship between the dividend and the put price? I would really like to understand this.
Thanks in advance and best wishes for 2023!
Yup good question, if someone exercises their call to buy the shares it will be for the dividend, but they risk losing more if shares fall more than dividend amount, so they will use the put as protection, only if put premium is worth less than the dividend amount
This is all good and dandy, but the problem is you will most likely get assigned the day before the ex date. and most likely you will not achieve a good spread between the stock price and the call option sell relative to the strike price. Thus, you will be exposed to a net loss unless you achieve going into the ex date with shares to receive the dividend. I guess the key is to achieve a good spread incase you do get assigned the day before, but how do you do that? The spreads are nearly unfair and very difficult to capture an "even" spread. I tried the debit price on TOS, where you lock the spread as a limit order, but it never gets filled, even at an even spread limit. Please advice.
Actually getting assigned is not a problem, cause u still got a decent credit, the real problem is the stock falling a lot after ex date
Well, if you go for the nearest strike price ITM you probably get a decent credit (by a few cents), but you're right, that's not much of an insurance for the expected price drop the next day, even with an expiration date that is nearing soon. And if you try to obtain a strike price deep ITM, then you wont achieve a decent credit at all. Ugh.@@ShihabPersonalFinance
Why not just do a sell limit equal to the purchase price or slightly higher after the close on the day of purchase. This will allow you to sell as soon as possible with no loss possible gain and the dividend. You may have to wait for the stock to come up for a few days.
Ya you could do that too, but the cc gives you some downside protection
This is exactly what I am trying to do now. I think you are right. You need to sell ITM calls (not ATM), but still leave some extrinsic value in order to demotivate the buyer to exercise the option. I will try with first Friday call, but in the worst case scenario I will hold stocks for a 2-3 weeks. Thanks a lot!
great video and more informative but can u also list out how much will all the charges from buying the stocks and wreting covered calls thnx kepp posting man TC
5.75 to buy 5.75 to sell the whole position, if my shares get called away though it would 5.75 to buy and 25$ to get out, plus a little bit of interest since I am using my margin account for a few days
Thnx alot very great strategy GLT
@@jaysonnuera1222 Im still stuck in the axp trade, will try to close it today, are you with questrade as well?
hey Shibab, there has been a lot of negative publicity about questrade. There had apparently been a lot of outages not allowing people to sell or buy stocks losing them a lot of money. Have you been experienced that?
Yeah I heard about it a lot of people aren't working planing it happened to me once and only in the morning I wasn't able to login and it was very lagging but then I logged back in in the afternoon and it was working fine for it to me wasn't a big deal why don't they trade anyways so it doesn't really matter if I can't login in the moment but I guess it's understandable I mean the market was crashing a lot of people wanted to sell servers might have been must have been backed up
are you with questrade
This is one of your better videos. Very interesting!
I thought you would like it. I am still in the trade though because market dropped. Hopefully tomorrow I can get out without a loss.
You can always do this inside of a roth ira for tax free money
yes exactly
jpm was a winner this week
I bought some Air Canada stock. It was very low when I bought it and now I could see it going up gradually. I think it’s a good buy right now. I learned buying stock from your channel. Really appreciate all the work you do.
Good luck, air canada should be fine in the long run
Shihab's Blog ok, I’m currently using CIBC investor’s edge. Which one is the best between questrade and CIBC?
Really depends what your strategy is if you're a long-term buy-and-hold never sell it really doesn't matter which broker you use CIBC is great but if you are an active investor you sell more often than a long-term investor you swing trade than the commission's are going to make a difference then in that case questrade is better and if you really are an active investor like options selling than interactive brokers is the best
How do you protect the downside?
By selling a covered call, helps you own thr stock at a lower price, but there is no complete protection, the stock can drop lower than your net debit
Hi Shihab, i tried this stratergy on the XOM but made a mistake on your suggestion of checking put and I compared the PUT in wrong direction. I bought it day before ex dividend date and on the ex dividend date my stocks are called away so now I'm going to get the dividend and where I can see the called away transaction in Questrade. Thanks
If your shares got called away, then you wont get the dividend, did you make some koney with the call option at least? You can see under account activity, under accounts section, not trading section
Shihab's Blog nope 👎 I think my in was not profitable if I have got the dividend purchase price 45.80 sold 45.75 + lost commission , assignment fee etc . ..
@@ravneetgill86 i did it with axp, got my dividend, but if I had just kept axp, would have made even more, ridiculous this bull rally
Hahaha.. that’s the thing we can’t predict
@@ravneetgill86 the qqq's are less that 5% away from all time highs, this is RIDICULOUS
Clever. Thanks!
Glad it was helpful!
1 april !¨!!! :D
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I thought dividends were taxed at capital gains rate?
No they have their own taxation rules