Early Options Assignment

On 10/2/09 I bought 500 shares of MO for $17.51 and sold 5 Mar $18 calls for .68. Cost average is $16.83. I was hoping the stock would move above $18 and get exercised early. Here is why, I received March time premium by selling the covered call but was exercised in December. This frees up the cash to put back to work. The reason I like this type of play is that if the stock didn't get exercised early, I'm either getting two dividends as well during this time period, or the stock never got above $18 in which case selling the closest to strike at the time of purchase also turned out to be a good move.

The ironic thing here is I was exercised today, but today is the ex-dividend date, so the person who exercised might not understand how it works. I will have to wait a few days until payment comes in to confirm, but I think I'm getting the dividend as well. Excluding the possible dividend, total return was 6.9% for a little less than 3 months. This is the type of investing I like to do with larger dollar amounts, or longer-term money. I viewed it as a safe play and originally planned to build the position to 2000 shares but the price moved in my favor from day one and I never got a chance to add to it. The 6.9% for 3 months sound good if you're playing with larger dollars, but the the total dollar gain here was only $585 since it was a small position.