The Dividends Plus portfolio is great for investors of all levels who want simple options trades for steady profits and low volatility. Our strategy is to focus on dividend-paying stocks with strong fundamentals, good-looking technicals and healthy dividends, and then structure covered calls to provide more-consistent returns AND downside protection.
We select three dividend-paying stocks and then sell three-to-six month calls against these stocks. Our aim is to generate a 12 to 15% annualized return, including dividends. We also target downside protection of at least 3% and sometimes as high as 15-20%. Each trade in this portfolio assumes 100 shares of the underlying stock and one option contract.
In the best case-scenario, your calls expire in-the-money, then you are assigned and deliver the stock at expiration. There is no further action required to close the position and based on the way we set up the trades, you book your full target profit. Plus, all along the stock should be paying dividends, which also go right into your account.
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