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Today I’m going to give an update my “Option Income Trade Alert” for March… and give you and opportunity to cash in on my newest trades for April, which target annualized yields of 70.9% to 238.7%.

Before we get started, in case you’re not familiar, for this monthly series, exclusive to Dividends & Income Select members, I make a relatively safe, high-income play on a dividend growth stock or fund that’s trading at an attractive price.

Most of the time, I’ll make the option trade on a security that’s been recently featured by one of our resident DGI analysts—Dave Van Knapp, Mike Nadel or Jason Fieber.

From time-to-time though, I’ll make a trade on an idea shared by an “outside” analyst I follow, like Brian Bollinger of Simply Safe Dividends or Chuck Carnevale of FAST Graphs.

At the end of the day, this series is focused on selling options for income on high-quality dividend growth securities that are reasonably priced at current levels.

With this in mind, let’s review what happened with my March trade…

Update on My Option Income Trade for March

For my March 2024 trade, I had sold two covered call options on Verizon Communications (VZ) — a high-quality, high-yield dividend growth stock trading at an attractive price. For my trade, which I made on March 19, I bought 200 shares of VZ at $39.95 per share and simultaneously “sold to open” two April 26, 2024 $40 call options for $0.95 per share.

This trade generated $190 in instant income, which was instantly added to my 401k retirement account at Fidelity.

In my trade write-up, I pointed out how Verizon’s ex-dividend took place on April 9, BEFORE the trade’s expiration date. Although unlikely, I warned readers that my dividend could get “stolen” if the buyer of the option exercised our contract early.

For this reason, I never depend on dividends in these option trades… I consider them a bonus. Sure enough, the buyer exercised the contract on April 8 and bought my 200 shares of Verizon at $40. Since the buyer purchased at least one day before the ex-dividend date, the buyer is entitled to Verizon’s next payout.

That’s ok with me, as the call income alone from this trade generated $190. And then, since I bought shares at $39.95 and sold them at $40, I picked up another $10 in capital gains… bringing my total profit on this trade to $200.

The trade generated a 2.5% total return in just 20 days, which works out to a 45.7% annualized yield.

Greg Patrick

P.S. I just made my Option Income Trade Alert for April 2024.  I went with TWO trades this time: one is a covered call that targets a 70.9%-102.2% annualized yield in 10 days. The other is a cash secured put targeting a 238.7% annualized yield in just two days. Combined, the trades generated $337 in “instant income” for selling the call and put options. If you’d like to follow along with this trade and get all the details, check out Dividends & Income Select with our 14-day free trial.