Does anyone use options trades as a way to increase dividends?

I usually buy stocks and sell covered calls in order to manage the risk of owning stocks and hopefully, lock in a gain. I usually do this by selling options with a strike price close to my purchase price or slightly below (out of the money). I see that many stocks offer calls very far out of the money strike prices. The total of the strike price and option premium is usually very close to the current market price of the stock. I thinking that if I am not at all interested in possible capital gains, I can buy a stock, sell the most out-of-the-money option available with a fairly out-there expiration date, and use the proceeds to buy more stock. Continuing this process would basically let me buy 50% more stock if I sell options with a strike price approx. 50% of the current market price of the stock. I would then receive 50% more dividends during the time that I held the stock (assuming I am not called out early). Just wondering if anyone else does this and how it has worked out.

Answer:
No it will not work because that is not how options prices work.

Its not even close to correct.

look up some way out of the moey options. An option with a strike price of half the current market value doesnt traderemoltely close to 50% of the stocks value. sometimes they only trade for 1% or 2% of the stocks current price.

Considering the current stock price is over 380, it wont work.

It all depends on how volitile the stock is. The more volitile the stock, the higher the amount you can get forthe option, but that is becausethere is a much greater chance that they will actually expire in the money.

Stocks with low volitility have almost no chance of ending in the money and so no one will buy them or if they do, they will only pay a few cents for them.

Some example -

http://finance.yahoo.com/q/op?s=siri&m=2.

For siruis, which trades for $4 and change it is the same. no one is willing to buy a $2 put. this is for a december expiration

http://finance.yahoo.com/q/op?s=goog&m=2.

for google, the puts for 200 are only trading for 10 cents for the december expiration. That means you would only get $50 if you sold an option, at 386 a share, thats not even close to one shares worth, let alone 50% of its price.

Longer expirations are worth even less. Other Questions and Answers:

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Does anyone use options trades as a way to increase dividends?

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