If you trade stock and options this way, you are clearly "trading" and not "investing." Trading is an entirely different world that requires meticulous and accurate detail to being objective and testing your theories. A newbie looks for opinions and ways to validate their theories. A trader does not rely on lack of knowledge or unfounded opinion, and looks for ways to invalidate a theory. A newbie is general and vague with his head in the clouds, whereas a trader is specific and detailed turning over every stone and looking under every possible misstep, calculating the next step from several angles and time frames.
In most jobs you can be dishonest or not, diligent and responsible or not, and slide by without knowing much or doing much. Trading will depend on your honesty with yourself and due diligence. You have obviously not yet tested this theory, and have no authority to ask the question of your peers or expect someone else to validate or invalidate your theory. We cannot do that for you.
"Is this a sound investing plan?"
Out of your element, you are neither "investing" nor do you have a valid "plan." If by "plan" you mean a "trade plan," that would also incorporate good money management techniques. Nobody would put 100% of their money in one position. So if you put 10% of your money into this theoretical position, you're talking about having a million dollars. Newbies always talk in big numbers and concentrate on profits rather than risk. Why would you care about a "plan" that requires a million dollars before you have a pot to pizz in or the knowledge of specific testing to see the difference?
One of the most important Samurai texts ever written, by Miyamoto Musashi, “The Book of the Five Rings (1643)”, offers this advice: “Think of what is right and true. Learn to see everything accurately. Become aware of what is not obvious. Be careful even in small matters. Do not do anything useless.”
People looking for the magic formula will find that trading is too much work. There is no one indicator or method, there is no get rich quick scheme, there is no pot of gold at the end of the rainbow.
There is no method or plan where you "do this" or "do that" every week and reap profits every week and consistently make money. The markets are not a money machine where you simply pull the lever every week and coins fall out. Once you clearly see this and firmly plant this idea in your head, you will begin to approach reality. You're dreaming.
If you want to develop a valid trade plan, read the book Rules of the Trade, by David Nassar.
We went through essentially the same strategy before and then you created a sock puppet to wipe out the answer. Why would you ask it again?
ATT calls are American options. That means they can be exercised early. People who trade big money in options are math and physics Ph.D.'s. They don't make childish errors (there are tons of strategies that work really well if you can count on your counterparty to do something stupid).
If the stock is going to pay a dividend prior to call expiration, the intrinsic value of the option is based on strike - dividend not just strike. All those Ph.D.'s who argue about stochastic volatility pricing models and what not are pretty good at subtraction.
Edit:
"I wanted to see what others had to say about it also"
Because you need some moron who read the Wiki entry on options to tell you how clever you are?
"Also is answering yahoo questions a serious hobby for you? "
Yes
Assume you have a retirement account of $100,000
Step 1. Buy 2800 shares of AT&T during week with ex dividend date (35.63X2800=99764)
Step 2. Sell two deep in the money covered calls that expire in 1 week. Ex Strike 32.Receive $10165 (363X28)
Step 3. ex dividend date passes. Receive .54X28000=$1512
Step 4. Covered calls expire and your shares are called (As long as AT&T does not fall below $32). Receive 2800X32=$89,600
Total Return.
-99764
+10165
+1512
+89600
= 101277.....Gain of $1,277 (not including commissions) Repeat weekly for a conservative annual return of about $45,000 (45%)
Is this strategy a safe income plan? I do assume that the covered calls will sell near only the intrinsic value
