Options Strategy for Wesco International: Enhance Income with Covered Calls

Shareholders of Wesco International, Inc. (Symbol: WCC) seeking to increase their income beyond the stock’s current 1% annualized dividend yield can consider selling a December covered call at the $220 strike price. By doing so, they could collect a premium of $12.20, representing an additional annualized return of 8.6% based on the current stock price. This strategy could yield a total return of 9.7% annually if the stock is not called away. However, any upside above $220 would be forfeited if the stock rises past this threshold. For the stock to be called, it would need to climb 24.1% from its current level, resulting in a 30.9% total return for shareholders, in addition to any dividends received before the stock is called.

When investing, predicting dividend amounts can be challenging, as they tend to fluctuate with a company’s profitability. For Wesco International, reviewing the dividend history chart for WCC is beneficial in assessing the sustainability of the recent dividend and determining the reasonableness of expecting a continued 1% annualized dividend yield.

Below is a chart depicting WCC’s trailing twelve-month trading history, highlighting the $220 strike price in red:

The trading chart, along with WCC’s historical volatility, serves as a useful tool when combined with fundamental analysis. This combination is essential for evaluating whether selling the December covered call at the $220 strike provides an acceptable reward for the potential risk of losing upside beyond $220. The trailing twelve-month volatility for Wesco International is calculated at 38%, considering the last 249 trading days and the current stock price of $176.84. Interested investors can explore additional call option strategies for varying expirations on the WCC Stock Options page at StockOptionsChannel.com.

In mid-afternoon trading on Monday, put volume among S&P 500 components reached 1.08 million contracts, while call volume was at 1.80 million, resulting in a put:call ratio of 0.60 for the day. This level of call volume indicates a strong buyer preference for calls relative to puts, particularly when compared to the long-term median put:call ratio of 0.65.

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