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I was wondering if it is possible to use call options (selling call options) to increase the yield of a dividend-paying stock (that I already own) by 1-2 percent per year?

What are the cons of this strategy?

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The advantage is that you get to keep the option premium. The obvious drawback is that your option can be exercised. You’re effectively capping your maximum gains on stock price increase.

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    $\begingroup$ Let's compare your call-writing strategy to just holding the stock: You receive some additional revenue from option selling, but you give up price appreciation when the stock goes up (and the option is exercised against you). That's the tradeoff. $\endgroup$ – noob2 Jan 24 at 16:01
  • $\begingroup$ I see. What I was thinking that I would price out my calls, so I would get 2 years' worth of dividends if the call would be exercised. But you are right, essentially I am giving up future price appreciation for income today... $\endgroup$ – gyurisc Jan 27 at 7:16

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