Explore Covered Calls to Enhance Your Earnings
Shareholders of Cummins, Inc. (Symbol: CMI) have a way to increase their income beyond the current 2.1% annualized dividend yield. By selling a covered call for January 2026 at the $420 strike price, investors can earn a premium of $14.70. This opportunity translates to an additional 3.9% return based on the current stock price, referred to as the YieldBoost. If the stock is not called away, this yields a total annualized return of 6%. However, if Cummins shares are called away, investors would lose any gains above $420. It’s important to note that the stock would need to rise 19% from current levels for that to happen. In such a case, shareholders would still enjoy a total return of 23.2%, including dividends collected prior to the stock being called.
Predicting dividends can be challenging, as they often fluctuate with company profitability. For Cummins, Inc., reviewing the dividend history chart below can help stakeholders assess the likelihood of continuing the current 2.1% yield.
The following chart outlines CMI’s trailing twelve months of trading history, highlighting the $420 strike price in red:
Understanding the chart above, combined with historical volatility, can guide shareholders in determining if selling the January 2026 covered call at $420 offers a good balance of risk and reward. Based on the last 251 trading days, the trailing twelve month volatility of Cummins, Inc. is calculated to be 24%. For more contract ideas with various expirations, visit the CMI Stock Options page on StockOptionsChannel.com.
On Thursday afternoon, put volume among S&P 500 companies reached 709,347 contracts, while call volume stood at 1.43 million, resulting in a put:call ratio of 0.50 for the day. This is significantly lower than the long-term median of 0.65, indicating that there is a strong preference for call options in today’s trading session.
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Also see:
- Past Earnings
- WPF shares outstanding history
- EWCZ market cap history
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
