Trade Continuation: Realty Income (O) Covered Calls

Here is the transaction to date:

• 07/15/11               Bought 200 O @33.7846                                            -6766.91
• 07/15/11               Sold 2 O Dec 17 2011 35 Calls@.7                             +128.50
• 08/15/11               Dividend                                                                         +28.98
• 09/15/11               Dividend                                                                         +28.98
• 10/17/11               Dividend                                                                         +29.04
• 11/15/11               Dividend                                                                         +29.04
• 11/22/11               Bought 2 O Dec 17 2011 35 Calls@.05                          -10.03
• 11/22/11               Sold 2 O Mar 17 2012 35 Calls@.8                             +148.47

Our roll out today lowers the amount out of pocket on this investment to $6383.93. This equates to $31.91/share. Realty Income is "The Monthly Dividend Company." It has a rising dividend for many years now. Our yield on cost is up to ~5.5%. If these calls expire worthless we will collect 4 more dividends totalling at least $116.16 (assuming no increase). That will lower our amount out of pocket to $6267.77 or $31.33/share.

Realty Income in this gal's opinion is easy pickings for double digit returns. When one juices the monthly dividend with out of the money covered calls, the out of pocket drops monthly. I don't recommend Realty Income in taxable accounts because the dividends are taxed as regular income. For a tax free account, however, O is very yummy.