Maximize Income with Cincinnati Financial’s Covered Call Strategy

Shareholders of Cincinnati Financial Corp. (Symbol: CINF) seeking to enhance their income beyond the stock’s 2.6% annualized dividend yield might consider selling the November covered call at the $140 strike. By doing so, they can secure a premium based on the $8.10 bid, which translates into an additional 10.6% rate of return on the current stock price. This approach, referred to as YieldBoost by Stock Options Channel, results in a total potential annualized return of 13.2%, assuming the stock remains below the $140 threshold. Should the stock price exceed $140, the shareholder would forfeit any gains above that level, but achieving this would necessitate a 6.9% increase from its current value. In the event of a call, shareholders would still realize a 13.1% return from the current trading level, alongside any dividends received prior to the stock being called.

Dividend payouts can vary significantly, influenced by the company’s profitability. For Cincinnati Financial Corp., examining the dividend history chart below may provide insights into the sustainability of the current dividend yield of 2.6%.

The chart below illustrates CINF’s trailing twelve-month trading history, with the $140 strike indicated in red:

This trading chart and CINF’s historical volatility can aid in assessing whether the November covered call at the $140 strike offers an adequate reward for the risk of capping potential upside beyond that price. Considering the last 250 trading days and the current price of $131.16, we calculate Cincinnati Financial’s trailing twelve-month volatility to be 26%. For additional call options ideas across various expirations, visit the CINF Stock Options page at StockOptionsChannel.com.

In mid-afternoon trading on Tuesday, the S&P 500 experienced a put volume of 750,318 contracts, while call volume reached 1.25 million, resulting in a put-to-call ratio of 0.60 for the day. This figure, compared to the long-term median put-to-call ratio of 0.65, indicates heightened call activity relative to puts, suggesting that buyers are favoring call options in today’s trading dynamics.

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