NEW YORK ( TheStreet ) — Using a call option to hedge against downward price risk is my favorite dividend-capture strategy. With this strategy, I have found I must be highly selective in my stock targets. In this review, I filter for the most worthy stocks also offering dividends.

Let’s look at my first stock, Gannett (GCI — Get Report ) as an example. Gannett operates as a media and marketing solutions company in the U.S. and internationally.

Ex-Dividend Date: June 06, 2012

Strategy: Buy Gannett stock and offer to sell the June $13.00 strike or lower call for 37 cents over the intrinsic value.

The option may get exercised early for a gain. In almost all cases, I sell the call option first to ensure the stock option leg is complete. If not, after qualifying for the dividend, I will look to close out the covered option with a gain of about 19 cents, plus the quarterly dividend paid by the company.

I review many call strikes and estimate the expected probabilities based in part on beta, bid, offer, volume traded the current day, open interest and time value/implied volatility.

Call options offer some protection from possible adverse moves in the stock price and provide offset revenue when the options do not fully cover down moves in the stock. Income is welcomed, but not needed from option premiums, so a break even from option premiums received/stock losses ratio is a win.

When learning a new trading strategy it is better to use a simulated trading account first. Stockpickr is a great tool to practice new strategies and learning about the market. I use Stockpickr and recommend it.

It is easy to make mistakes when starting out on a new strategy and mistakes cost a lot less with a simulated account. After a level of confidence is built, then it may be time to move into a real money account.

Gannett’s upcoming stock dividend appears to be attractive and worth the time and effort to capture. A requirement I have is be able to sell a call option in either the front, or the first back month that is in the money, and with enough of a premium that I will not object to an early exercise notice. This does happen from time to time, can be profitable if everything is done according to plan.

It is important to sell the call option hedge at or near the asking price for at least the minimum amount over intrinsic value. I don’t want the option hedge unless the sale will provide at least the minimum 37 cents over intrinsic value.

If my shares are called away the day before trading ex-dividend (resulting from the option buyer wanting the dividend), I gain about 37 cents. The most I can make is 57 cents if I hold the covered call through option expiration day and the stock gets called away.

My last step (completed before making a trade on the same day) is to check company announcements and news sources for possible events that may cause the stock price to move. This is especially critical during earnings season.