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Dividends & Covered Calls Strategy Returns +4.7% in April 2007

In the article “John Bogle Says Modest Returns Over Next Decade – Dividends & Covered Calls” we pondered John Bogle’s prediction of modest stock market returns over the next decade. Mr. Bogle predicted annual stock market returns in the 7% range over the next decade.

In the event Mr. Bogle’s prediction is on target, we considered a potential strategy for investors to consider for making the most of the situation.

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The strategy consisted of covered calls stock options for stock paying dividends. The idea behind the strategy is making a return on the stock dividends and also making a return from covered calls positions for the dividend paying stocks.

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Using this strategy we selected several high dividend covered call stock options for April of 2007, and every position selected was fully profitable. The average return for the positions selected was 4.7%. The 4.7% return was generated in only 45 days, and we’re already more than halfway to matching John Bogle’s 7% annual return prediction.

Using PowerOptions stock option search tools, we again searched for covered calls positions for high dividend paying stocks and the results are shown below.

PowerOptions covered call search
RAS 28.91 (unch.) RASEF 07 MAY 30.0 (23) 0.70 2.4 2.5 6.3 11.1
ACH 29.67 (+0.52) ACHEF 07 MAY 30.0 (23) 0.95 3.2 3.3 4.5 10.4
WPL 9.98 (+0.04) WPLEB 07 MAY 10.0 (23) 0.25 2.5 2.6 2.8 6.0
CSK 15.40 (+0.60) CSKEC 07 MAY 15.0 (23) 0.75 4.9 2.4 2.4 5.9
ALSK 15.28 (+0.02) ULOEC 07 MAY 15.0 (23) 0.60 3.9 2.2 2.2 5.6
(For more details click the ticker symbol above)

The ACH position is the only position that was in last month’s selections and in this month’s selections, all of the other positions are new for this month.

The RAS position has the highest maximum potential covered call return of 6.3% and RAS also has the highest dividend yield return. The 6.3% maximum return requires the price of the RAS stock to increase to or above the $30 strike price of the call option.

The CSK position has the highest downside protection at 4.9%. As long as the price of the CSK stock does not decline more than 4.9% at options expiration, the position will remain profitable.

The ACH position has the highest % if unchanged potential return at 3.3%. If the price of the ACH position is 29.67 at options expiration, the position will return 3.3%.

Competitors for RAS include: Anthracite Capital, Inc. (AHR), and iStar Financial Inc. (SFI).
Competitors for WPL include: Merrill Lynch & Co. Inc. (MER), The Bank of Bermuda Limited (private), and Nicholas-Applegate Capital Management LLC (private).
Competitors for CSK include: Amcor Ltd. (AMCR), MeadWestvaco Corporation (MWV), and RPC Group Plc (private).
Competitors for ALSK include: Dobson Communications Corp. (DCEL), General Communication Inc. (GNCMA), and AT&T Alascom (private).
PowerOptions provides a free 14-day trial of its service. So join PowerOptions today, and you too can start reaping the benefits of the covered call investment strategy.

For more information about how to identify and research great option trades, visit the PowerOptions website. There you will find the data you need to make quick, clear, and informed decisions. You can trade knowing you have found the best investment. Also, PowerOptions will allow you, with a few quick clicks, to quickly and accurately compare trades. PowerOptions‘ premium customer support is second to none in the industry. They can be easily contacted when you need them at their toll-free number to answer customer questions. Call them now toll free at 877-992-7971.

PowerOptions‘ sister company PowerOptionsApplied provides expert stock option trading recommendations. PowerOptionsApplied specializes in covered calls, naked puts and iron condor stock options strategy recommendations. PowerOptionsApplied provides a 30-day risk free trial of its service.

[tags] John Bogle, dividends, The Bank of Bermuda Limited, Nicholas-Applegate Capital Management LLC, RPC Group Plc, AT&T Alascom, AHR, Anthracite Capital Inc. REIT, DCEL, Dobson Comms. Corp., GNCMA, GCI Inc., MER, Merrill Lynch & Co. Inc., SFI, iStar Financial Inc., covered call investment strategy, investment strategy, iron condor, poweroptions, stock option trading, stock options [/tags]

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