Here is an example

http://seekingalpha.com/article/252553-using-covered-calls-to-achieve-a-10-yield-on-apple

Using Covered Calls to Achieve a 10% Yield on Apple

You own Apple (AAPL). Good for you. Great company. Insanely great stock. Sadly, the dividend yield is 0%. Or is it?

Here's how to generate pretty much any reasonable dividend yield you want with AAPL and still leave yourself some upside potential:

With AAPL closing at $356.85 Friday, this table shows how big the annual dividend would need to be to attain various yield levels:

Dividend YieldAnnual DividendMonthly Dividend

3%	10.71	0.89
5%	17.84	1.49
8%	28.55	2.38
10%	35.69	2.97

So, for example, if we want a 10% dividend yield from AAPL all we need to do is generate $35.69/year, or $2.97/month, in covered call premium.

In order to compare options with different expiration dates we convert the annual premium into a daily value: $35.69/365 = 9.8 cents per day. So, to achieve 10%/year yield we need to generate 9.8 cents per day in call premium.

Here are three AAPL options that pay 9.8 cents per day or more:

ExpirationStrikeCall BidDaysCents/DayUpside Potential

Mar 19	370	4.30	33	13.0	13.15 (3.7%)
Apr 16	375	6.85	61	11.2	18.15 (5.1%)
May 21	380	9.95	96	10.4	23.15 (6.5%)

You could pick any of those to generate over 10% annual yield from AAPL and still have between 3.7% and 6.5% upside potential during the next 3 months. (One thing to keep in mind is that next earnings is Apr 20 so the May option cycle includes an earnings report.)

Want more upside potential? Then accept a smaller yield. If you only want a 5% dividend yield from AAPL then you need 4.9 cents per day in premium, and could choose any of these:

ExpirationStrikeCall BidDaysCents/DayUpside Potential

Mar 19	380	2.01	33	6.1	23.15 (6.5%)
Apr 16	390	3.25	61	5.3	33.15 (9.3%)
May 21	400	4.80	96	5.0	43.15 (12.1%)

By accepting a 5% yield you give yourself between 6.5% and 12.1% upside potential over 3 months (and, again, the May options include an earnings release so be sure to consider that).

How high can the yield go? The at-the-money AAPL options (360 strikes for next 3 months) have an annualized return if flat of 20% to 24%. You would give up virtually all of your upside potential, but could still make around 22%/year in call premium.

What are the risks?

Like any covered call investment, there is the risk that AAPL drops. If AAPL drops by more than the amount of call premium you receive then you will have a loss. Of course, the point of this strategy is to generate a dividend-like income stream from a non-dividend paying stock that you want to own (or already own) long term. So, assuming you are willing to take the risk of being long AAPL, the strategy above shows you a lower risk way to do it than a simple buy-and-hold strategy.

The other "risk" is that you may not make as much as you could have if you hadn't sold the call. If AAPL rises above the strike price you've chosen then the best you can do is receive the strike price per share for your stock (unless you want to buy the option back, potentially at a loss).

Generally it's a good idea to write near term options so that you can reset the strike price once a month and take advantage of short-term option decay. But it depends on your commission schedule and how much time you want to invest. Even on a completely passive portfolio, covered calls are a good way to increase the "dividend" yield on any stock.

Disclosure: I am long AAPL