over the last several years i have done cc's on tlt several times a year and since i am close to retirement thinking about keeping an ongoing position.
if one is doing cc's for income and not capital gains one would like a stock that is a rolling stock.....overall tlt is.
at first i was worried because the premium was not large compared to the dividend so i was worried about being assigned so the person could capture the dividend and not me. this usually occurs if the time value left is less than the dividend. so what i have been doing the last several years is:
facts: tlt is a long-term treasury etf; monthly dividends; currently at 4%; ex-dividend date is usually the first of each month.
so to avoid being assigned for the dividend what i have done and currently doing is this:
buy tlt several days before ex-dividend, wait until day after ex-dividend and then sell front month highest time value strike .....
currently tlt is 89.16, last dividend was 0.29 the 89 april strike is 0.86 so 0.70 time value
the 0.29 and 0.70 is 0.99 over 1% for the month or 12% for the year....this with a bond fund.......why would retirees be happy with 3 to 4 %.
i have probably traded this 15 times and i have probably averaged at 9% return annually.
anyone else trade this or have any ideas to enhance the strategy? drjoe
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