2 High Yield Covered Calls Trades

by Robert Hauver

Looking for quick income from your trading? There are 2 trades sitting near the top of our Covered Calls Table, which offer annualized yields of well over 25%. These aren’t high dividend paying stocks, but, rather, they’re dividend stocks with high options yields.

These 2 stocks couldn’t be more dissimilar. One is a U.S. homebuilder, and the other is a U.S.-based, multinational tech giant:

MDC Holdings (MDC): MDC’s homebuilding business activities include the purchase of finished lots or development of lots for the construction and sale of single-family detached homes to first-time and first-time move-up homebuyers under the Richmond American Homes name. The company’s financial services business activities comprise the origination of mortgage loans primarily for homebuyers; provision of third-party insurance products to homebuyers; and title agency services to homebuyers in Colorado, Florida, Maryland, Nevada, and Virginia. It also provides insurance coverage on homes sold and for work performed in completed subdivisions; and re-insures the claims. M.D.C. Holdings, Inc. was founded in 1972 and is based in Denver, Colorado.

Cisco Systems (CSCO): Cisco designs, manufactures, and sells Internet protocol (IP) based networking and other products related to the communications and information technology industries worldwide. It offers switching products, including fixed-configuration and modular switches, and storage products that provide connectivity to end users, workstations, IP phones, access points, and servers, as well as function as aggregators on local-area networks and wide-area networks; and routers that interconnects public and private IP networks for mobile, data, voice, and video applications.

Dividends: MDC, which pays a $.25 quarterly dividend, paid out its first 3 2013 dividends in December 2012, to help its shareholders avoid higher dividend tax rates in 2013. Not to worry, however, since you can recapture this amount and more, via selling covered calls. (See below)

CSCO made a hefty raise to its quarterly dividend in late 2012, upping it by over 21%, to $.17, from $.14. CSCO also goes ex-dividend on 7/1/13.

Options: MDC currently has an out-of-the-money September $37.00 put which pays $2.65, which equals 7.25%, or 28.46% annualized for this approx. 3-month trade. If MDC moves to $37.00 or higher, your MDC shares will get assigned, resulting in an additional $.46/share gain, for a total potential annualized assigned yield of over 33%.

(You can see more details on this and over 35 other call option trades in our free Covered Calls Table.)

CSCO has a shorter call expiration, a July $25.00 call option, which pays $0.46, offering you a 27.57% annualized yield. This call is also above CSCO’s share price, so if CSCO rises to $25.00 or above, you’ll receive an additional $.18/share.


There are also attractive put options selling opportunities for MDC, which you can learn more about, in our free Cash Secured Puts Table.

Author: Robert Hauver, copyright 2013 DeMar Marketing, All Rights Reserved.
Disclosure: Author was short MDC put options, and long CSCO shares at the time of this writing.
Disclaimer: This article was written for informational purposes only. Author not responsible for any errors, omissions, or actions taken by third parties as a result of reading this article.