Monday, May 4, 2015

CSCO Covered Call Option

5/4/2015  11:18 AM  E.T.

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. 

Strike price:

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%.

Expiration Date:

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