12.8% yield

here is a way to get a hypothetical yield of 12.8% annualized out to next January 19.

this morning you can buy SPY for $134.14 a share
and you can write a call on that position at a 134 strike price out to January 19, 2013 and sell that call for $8.02.

Imagine you have a million dollars to invest.

Buy 7900 shares of SPY at a cost of $1,059,706.
Write 79 calls at 134 out to 1/19/13 and get back $63,358

cost of position is $996,348.

now imagine that next January 19 the stock closes at or above 134, then your stock will be called and the proceeds will be
$1,058,600 for a gain of $62,252.
You also will have received a dividend of around $12,363 during this time

total income from this would be $74,615.

if you annualize this amount you get a yield of 12.8%

what is the risk?
the stock goes down and closes below 134 but you have insurance here of $8 a share so even if it went down to 126 you would not lose any thing.

other risk is that the stock goes way up in which case you do not get the big gain.