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Author: Zumba Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 1207  
Subject: Re: Selling covered call on dividend stock Date: 11/23/2012 1:17 PM
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Hi jkens - Under no circumstances would you be responsible for paying out dividends as a result of holding a short, ITM call option. You would be responsible were you short the stock.

However, early assignment is a real risk. The only times I've ever had short calls exercised early were with dividend paying stocks. This has happened to me two times, once just a week prior to expiration, and the other time nearly a month prior to expiration - both times the exercise came just before the ex-dividend date so as to qualify for the dividend payment. So early exercise is a real risk to consider.

But I only sell calls in the hope that the option will get exercised. I try to sell calls on stocks that are at the low end of their price range in hopes of getting the commission plus a small gain for price appreciation.

Paul
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