- S&P 500 Index standing (starts with 500 high-quality companies).
- S&P rated four or five stars (narrows down to about 200 companies).
- I look at annual dividend yield next, seeking from between 2 and 5 percent. This criterion also provides me with a little up-side opportunity and down-side protection in the shares, and adds a cash flow factor to the account.
- Next, I will try to have a price criterion, depending on the funds available in my account, with the objective of setting up a multiple lot position.
Sold 3 GLW Feb 2014 $19 for a net of $127.24
1) Options Income: = $127.24
2) Dividend Income: Ex-date is February, dividend is $0.10 ($30.00)
3) Capital Appreciation if assigned at $19.00: $53.89
Total Net Profit if assigned and dividend collected: $211.13
Absolute Return on Investment: ($211.13/$5,629.00) = 3.75%
Annualized Return if Assigned (32 days): 3.75%*(365/32) = 42.78%