Using Stock Options to Strip Dividends?

Here’s an interesting option trading strategy I had never heard of before. It’s called dividend stripping. If you know of any stocks getting ready to declare a decent sized dividend, you may want to check out the following article. In fact, they say you can do it on any sized dividend.

AFLAC Incorporated (NYSE: AFL) is seeing elevated options trading today in the FEBRUARY 2012 Call options.  When you see almost 20-times normal options trading volume, many imaginations can hit the mind.  Rather than anything sinister being at work, this looks to be quite simply just another dividend capture trade.

We have not tracked this activity of late, but with so many high yields available in dividends it has likely been taking place with those with the brains and capital to manage that sort of trade.

CALL$  Vol.       OpInt
40.00   4,320      1,079
41.00       1             247
42.00   7,522      1,875
43.00   10,000   2,493
44.00   16,880   2,811
45.00    9,482     2,371

AFLAC holders will be receiving a $0.33 per share quarterly payout and the record date is Feb 15, 2012 and payable March 1, 2012.  What is interesting about this is that the 2.7% dividend yield does not generally stand out to me as a solid enough of a yield which many dividend capture strategists would go after.

Joe Kunkle of confirmed to us that this was dividend stripping in the options.  He also reminded us that those traders who do that can do it for almost all dividends.  Good to know for the future.

See 24/7 Wall St. for the rest of the story

Option Trading Secrets