Dividend Float Case — Western Union (WU)

Buy 100 shares at $8.00 and sell a deep ITM LEAP call (Strike $5.00, Exp Jan 21, 2028) to immediately release $300 as productive float. Dividends continue, but on a smaller capital base — lifting effective yield to ~18.8%.

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Why this works

The deep ITM LEAP carries substantial time value, which in most cases deters early assignment far from expiry. You lock a defined gain (cash in hand) and reduce locked capital exposure. The same $94.00 annual dividend now sits on a smaller base ($500.00), boosting effective yield.

Capital Released

$300.00

Locked Capital

$500.00

Dividend / Year

$94.00

Yield Before → After

11.8% → 18.8%

Months to Expiry

26 mo
If price falls (e.g., $8 → $5): Dividend yield on market price rises to ~18.8% (if dividend stays $0.94). Weakness often lets you roll the short call for more premium, increasing float without adding directional risk. We apply this leg only when valuation and balance-sheet quality check out — WU qualified.
Note: Dividends can change. Manage early-assignment risk near ex-div dates by checking remaining time value and rolling if needed.

Float Compounding on $300 Released

Monthly RateFuture Value @ 26 moFloat Gain
1.00% $388.58 $88.58
1.50% $441.81 $141.81
2.00% $502.03 $202.03
3.00% $646.98 $346.98

Key Numbers (Recap)

Initial Invested Capital$800.00
Capital Released (Premium)$300.00
Locked Capital (Strike × Shares)$500.00
Dividend / Year (100 shares)$94.00
Yield Before11.75%
Yield After18.80%
ExpiryJan 21, 2028 (26 months)
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Disclaimer: Educational illustration only; not investment advice. Options involve risk. Dividends may change. Manage early-assignment risk near ex-div dates. Use with valuation discipline and risk controls.