Some companies, especially financial and real estate it seems, have really high dividend yields.
One in particular has a yield near 18%, with most of that being paid in November, December, and January.
I know that if you buy the stock just before the dividend run, you don't really make the $$ from the dividend immediately because when they pay each $1.40 dividend, the stock will drop by $1.40.
But what about buy-writes? Seems to me if you sell deep in the money calls off the dividend yielding stock you buy you can still collect the dividends, and the short calls eliminate downside risk. $31 stock - $21 for calls with $10 strike = $10 per share for $3.35 in dividends over the next 2.5 months, 33% gain in 2.5 months near risk-free.
This seems to good to be true, so what am I missing here?
One in particular has a yield near 18%, with most of that being paid in November, December, and January.
I know that if you buy the stock just before the dividend run, you don't really make the $$ from the dividend immediately because when they pay each $1.40 dividend, the stock will drop by $1.40.
But what about buy-writes? Seems to me if you sell deep in the money calls off the dividend yielding stock you buy you can still collect the dividends, and the short calls eliminate downside risk. $31 stock - $21 for calls with $10 strike = $10 per share for $3.35 in dividends over the next 2.5 months, 33% gain in 2.5 months near risk-free.
This seems to good to be true, so what am I missing here?
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