Sunoco Dividend Capture ($SUN)

Sunoco, Inc. (SUN)    Yield: 1.68%
   Dividend Amount: $0.15
   Ex-Dividend Date: November 08, 2011
   Beta: 0.66
Sunoco, Inc., through its subsidiaries, refines and markets petroleum products, and manufactures chemicals in the United states. It operates in five segments: Refining and Supply, Retail Marketing, Logistics, Chemicals, and Coke. The company was founded in 1886 and is based in Philadelphia, Pennsylvania.

I am interested in this company primarily for the dividend, but there is also a chance the price could fall enough that I end up owning it for longer than planned. So I must be sure this is a company I would not mind holding on to for a while. If I am not willing to own a dividend paying company if the price falls, I will pass and move on to one I will be happy holding. There are many dividend capturing tactics, and I have used many. In this article I will describe one of my favorite and easy to understand methods of making gains through options and dividends. All while knowing if the stock falls in price, I will be comfortable owning the stock for a longer period.
In this article we will go over an upcoming dividend that I may capture with a minimum amount of risk. The criteria that I use is that I must be able to sell a call option in either the front, or first back month that is in the money, and with enough premium that I will not mind getting exercised early (which happens often and can be a good thing if the trades are executed correctly).

Strategy:
In combination with my buying the stock and after checking company updates, offer to sell the November $35.00 strike call for $1.15 over the intrinsic value. The option may get exercised early for a gain. If not, after qualifying for the dividend, I will look to close out the covered option with a gain of about about $0.44.

The current book value per share is 23.35.
For the same fiscal period year-over-year, revenue has improved to $37.49 billion for 2010 vs. $30.39 billion for 2009. The bottom line has rising earnings year-over-year of $234.00 million for 2010 vs. $-329.00 million for 2009. The company’s earnings before income and taxes are rising with an EBIT year-over-year of $735.00 million for 2010 vs. $-511.00 million for 2009.

At $37.38, the price is currently below the 200 day moving average of 39.84, and above the 60 day moving average of 35.01.
In the last month, the stock has increased in price 6.55%, with a change from a year ago of -9.39%.
When comparing to the S&P 500, the year to date difference is -9.10%.

Remember, you must buy a stock at least three business days before the record date (at least one business day before the ex-dividend date) to qualify for a dividend.

My last step (completed before making a trade on the same day) is to check company announcements, and news sources for possible events that may cause the stock price to move. This is especially important during earnings season.
I research the different call options and calculate the expected probabilities based on Beta, Bid, Offer, Volume traded the current day, open interest, and time value / implied volatility. The Options offer some level of protection from down moves in the stock, and provide revenue to cover the times that the options do not fully cover down moves in the stock. Income is not needed from the option Premiums, so a break even from premiums received/stock losses ratio is a win.
I use a proprietary blend of technical analysis, financial crowd behavior, and fundamentals in my short-term trades, and while not totally the same in longer swing trades to investments, the concepts used are similar. Nothing in the article should be considered investment advise, but you may want to use this article as a starting point of your own research with your financial planner