Editor’s Note: I’m going out of town for a family wedding later today so I’m issuing this week’s trade alert a day earlier than usual. I may not be available to respond to stock talk questions until Monday, so please be patient.

We’ve held The Williams Companies (NYSE: WMB) in our portfolio for more than a year, during which time it has reliably paid out a dividend yield of roughly 4%. That’s fine for investors seeking moderately high cash flow, but I’d like to free up the capital tied up in this position so we can earn much bigger option yields like we have recently.

However, WMB is currently trading slightly below our original cost basis of $30.40 so I am going to write a covered call option to get this position back into the black. I don’t believe WMB is about to hit the skids, but its share price declined by about the same amount as its dividend payments over the past year resulting in no net gain. That doesn’t cut the mustard for a service that aims for double-digit annualized total returns so it’s time to cut it loose.

Here is how you do it (since this is a covered call, these trade instructions only apply if you currently own shares of WMB; this is not a short put trade).

How to Make the Trade:                   

• Trade: Sell to open the January 18, 2019, $29 Call option on WMB.
• Symbol: WMB190118C00029000
• Allocation: Sell one call for every 100 shares of WMB you would be pleased to sell at $29 per share.
• Prices:
  • Limit Order Price: a credit of $1.50 per share or more.
  • Tell your broker: “I want to sell a covered call on The Williams Companies (NYSE: WMB) stock. Specifically, I want to ‘sell to open’ one January 2019 $29 Call for a credit of $1.50 per share or more.”
• Further Instructions Regarding the Trade:
  • If the option price changes, you can adjust our recommended limit based on the midpoint of the bid/ask spread, which you should be able to see when entering the trade. Just make sure the potential credit is at least $1.25 per share or more.
  • Place your limit order on a “good ’til canceled” (GTC) basis and be patient.