12-16-2013, 04:31 PM
(09-26-2013, 08:35 AM)hendi_alex Wrote: Buy INTC @$23.75. Immediately sell April $24 calls for $1.25. Target return for 7 month period equals $0.25 cents c.g., plus $0.45 dividend, plus $1.25 for the call or $1.95 minus about $0.05 expenses for a 300-500 share move. Goal would be 8% cash flow return during the period. I would generally buy on the dip and wait for a rebound before selling the calls, in order to maximize the call income, but sometimes when very cautious will sell the calls immediately after taking the long position. When volatility is higher, the calls would bring in a good bit more and would be easier to get my 10% in approx six month period.
If not overloaded on INTC, I would take this position this a.m. But that is because I like INTC's long term fundamentals, like to be long the stock, and like their history of dividend growth.
Why not sell the put then? The skew typically makes the puts richer and if INTC gets put to you, you bought it at a good price and further discounted by the premium you received.