- just 1-2 days before ex-date of the next coming dividend payment
- buy a long position in the stock (say hundred shares)
- and sell the equivalent amount of covered-call option contracts (say 1 contract of 100 options). You should choose calls options which are deep-in-the-money so that you can lock the price at which you will sell the stock
There are two advantages with doing this:
1- the options that you sell will lock beforehand the price at which you sell your stock, and since you know the dividend you know exactly the list of cashflows beforehand so you can calculate and see which gain you'll make, which should typically be fair thanks to the large dividend paid by the companies.
2- the options you sell are deep-in-the money and therefore thanks to the so-call volatility smile, your options have a slight tendency to be overpriced (ie you sell above the true implicit value of the option), and his large premium will reduce the amount you need to invest to enter this strategy.
Then when ex-date has been reached depending on the option&stock price, you can decide to close your position straight away which is probably the best thing to do because you get back your cash immediately, or to wait until option expiry which will naturally close your position since you have sold options that are deep-in-the-money, which means that owner of these call options will exercise them and buy your shares at the predefined price.
For all of these trades, the return should be positive, with around 2-3% each time, can be up to 8%-10% if you are lucky. I mean we are talking about better returns than the S&P500!