Maximizing Returns: Exploring Marketaxess Holdings Inc’s Covered Call Strategy

Smart Investing with Marketaxess: A Detailed Look

Shareholders of Marketaxess Holdings Inc (Symbol: MKTX) who wish to increase their income beyond the stock’s 1.1% annual dividend yield might consider selling a covered call option with a May 2025 expiration at the $280 strike price. By doing this, they can collect a premium priced at $14.00. This strategy can boost returns to an annualized rate of 12.6% if the stock is not called away. However, if Marketaxess shares rise above $280, any gains beyond this strike price would not be realized. Given that the stock needs to increase by 6.7% for this scenario to occur, shareholders could expect a return of 12.1%—combining profits from the option with any dividends received—if the stock is called.

Dividend amounts are influenced by a company’s financial performance and can vary greatly. Analyzing Marketaxess’s dividend history can provide insight into the likelihood of sustaining the current 1.1% yield.

Below is a chart detailing MKTX’s trading activity over the past twelve months, with the $280 strike illustrated in red:

The historical volatility of the stock, when examined alongside the chart, aids investors in determining whether selling the $280 covered call offers a favorable risk-to-reward ratio. For context, the trailing twelve-month volatility of Marketaxess, based on the last 252 trading days and the stock’s current price of $261.57, is calculated at 35%. For additional options strategies with various expiration dates, check out the MKTX Stock Options page on StockOptionsChannel.com.

During mid-afternoon trading on Wednesday, the options market reflected a put volume of 1.06 million contracts and call volume of 1.82 million, resulting in a put:call ratio of 0.58. This ratio is lower than the long-term median of 0.65, indicating stronger interest in calls compared to puts among S&P 500 components at this time.

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The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.