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Shareholders of Mercury General Corp. (Symbol: MCY) can enhance their income by selling a December covered call at a $70 strike, collecting a premium of $4.40, which annualizes to a 13.6% return against the current stock price of $63.66. This could yield a total annualized return of 15.6% if the stock is not called away. MCY shares would need to rise 9% for the stock to be called, resulting in a total return of 15.8%, inclusive of dividends collected.
The company’s trailing twelve-month volatility is calculated at 42%, and on Wednesday afternoon trading, S&P 500 put volume reached 568,821 contracts while call volume hit 1.12 million, indicating a put:call ratio of 0.51, significantly favoring calls compared to the long-term median of 0.65.
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