Optimizing Returns Through Covered Calls

Shareholders of Broadridge Financial Solutions (Symbol: BR) seeking to amplify their earnings beyond the stock’s modest 1.6% annualized dividend yield have a potent tool at their disposal. By selling the December covered call at the $210 strike price and pocketing the premium based on the $12.30 bid, investors can potentially unlock an additional 8.1% rate of return against the current stock price. This innovative strategy, dubbed the YieldBoost by Stock Options Channel, could yield a robust 9.7% annualized return, provided the stock remains unencumbered. While there is a risk of forfeiting potential gains if the stock surpasses $210 and is called away, such an occurrence would require a substantial 5.3% surge from present levels. In the event of such a call, the investor stands to realize an impressive 11.5% return from this barter, coupled with any accrued dividends prior to the call.

Examining Dividend Viability and Historical Performance

Historically, dividend payouts are subject to the ebbs and flows of a company’s profitability. For stakeholders of Broadridge Financial Solutions, scrutinizing the dividend history chart for BR can provide valuable insights into the sustainability of the current dividend and whether a 1.6% annualized yield is a reasonable expectation.

Additionally, it is useful to delve into BR’s trailing twelve-month trading record, with the $210 strike level accentuated in red, to complement fundamental analysis and gauge the desirability of selling the December covered call at that threshold.

Assessing Risk and Reward

By evaluating both the chart depicting BR’s trading history and the stock’s historical volatility, shareholders can make informed decisions on whether the potential rewards of selling the December covered call at the $210 strike offset the risks associated with capping profits beyond $210. With a trailing twelve-month volatility of 18%, investors can weigh the risk-reward profile of this strategic option against the backdrop of market dynamics (Ever wondered whether most options truly expire worthless? Explore this and other pervasive options myths debunked). To explore alternative call options contract ideas covering various expiration periods, check out the BR Stock Options page on StockOptionsChannel.com.

In the realm of S&P 500 components, put volume tallied 652,566 contracts, while call volume stood at 1.38M in mid-afternoon trading on Monday. This resulted in a put:call ratio of 0.47 for the day, indicating a notable preference for calls over puts among buyers. Compared to the long-term median put:call ratio of 0.65, the current scenario reflects heightened call volume in the options trading arena today.

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The perspectives articulated in this piece are solely those of the author and may not necessarily align with the views of Nasdaq, Inc.