NiSource Inc. Offers Options for Enhanced Income Strategies

Shareholders of NiSource Inc. (Symbol: NI) can explore ways to increase their income beyond the stock’s 3% annualized dividend yield. By selling the October covered call at the $40 strike, investors can collect a $0.95 bid premium, which translates to an annualized return of 6%. This additional income leads to a total potential yield of 9% if the stock is not called away. However, any upside beyond the $40 mark would be lost if the stock price rises and the option is exercised. NI shares would need to increase by 7.3% from current levels for that scenario, resulting in a 9.8% return accumulated from this trading level, in addition to any dividends collected before the stock is called.

Dividend payouts are typically unpredictable and fluctuate with the company’s profitability. Analyzing the dividend history chart for NiSource Inc. can provide insights into whether the current 3% yield is likely to persist.

Additionally, the chart below displays NI’s trailing twelve months of trading history, with the $40 strike highlighted in red:

The aforementioned chart, combined with NiSource’s historical volatility, assists investors in evaluating whether selling the October covered call at the $40 strike offers a reasonable risk-reward balance by ceding potential upside. The trailing twelve-month volatility for NiSource Inc., calculated based on the past 250 trading days along with today’s price of $37.32, stands at 19%. For additional call option strategies with various expiration dates, investors can refer to the NI options section.

In mid-afternoon trading on Wednesday, the put volume among S&P 500 components reached 1.13 million contracts, while call volume surged to 2.91 million, creating a put:call ratio of 0.39 for the day. This figure, significantly lower than the long-term median put:call ratio of 0.65, indicates a strong preference for call options among buyers in the current market environment.

For further insights on the most discussed call and put options today, investors are encouraged to continue their research.

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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.