Monday, May 4, 2015
CSCO Covered Call Option
Cisco Systems, symbol CSCO seems like dead money. Many of us have held that stock for quite a while. The dividend of 2.8% does pay you to wait; and perhaps the succession plan announced today is encouraging, yet I need more. Therefore, I will sell a call today on the remaining shares I own.
I selected a strike price of $32. That strike price gives me a nearly 40% gain on my basis and a 9.4% gain on shares if I bought today. CSCO has had trouble getting out of the 20's and if it does, it may soar and I could lose that upside potential. However, I am willing to lose a 2.8% dividend. I could buy Telephone, symbol, T and boost my income to over 5%.
I picked an August expiration because the call premium of $.45 is well above the one percent I demand from a call. Moreover, the expiration date is out far enough that I will also get the $.21 dividend expected about 6/30 or 7/1 2015. On a personal level I will try for a $.50 premium and if I cannot get it by mid afternoon, I will lower the limit to $.45.
Covered Call Table:
The table below presents the covered call analysis.
Disclosure: Long CSCO with calls