Maximizing Income: Wingstop Inc’s Covered Call Strategy

Shareholders of Wingstop Inc (Symbol: WING) seeking higher income than the stock’s 0.5% annualized dividend yield might consider selling a covered call option for January 2027 at the $290 strike price. By collecting the premium from the $34.60 bid, investors can secure an annualized return of 8.7% against the current stock price. This strategy raises the total potential annualized yield to 9.2% if the stock is not called away.

However, if the stock price exceeds $290 and the shares are called, any upside beyond this level will be lost. This would necessitate a substantial climb of 31.4% from today’s levels. In such a case, shareholders could still achieve a significant total return of 47.1% from the current trading point, plus any dividends accrued before the stock is called.

Dividend Stability and Historical Context

Generally, dividend amounts are unpredictable and fluctuate based on a company’s profitability. Analyzing Wingstop’s dividend history can provide insight into the likelihood of continuation of the current rate. Below, we present a chart detailing WING’s dividend history:

The following chart illustrates WING’s trailing twelve-month trading history, with the $290 strike point indicated in red:

Assessing Volatility and Risk

The aforementioned charts, alongside the stock’s historical volatility, serve as useful tools. They assist in evaluating whether selling the January 2027 covered call at the $290 strike offers adequate compensation for relinquishing potential gains above that point. It is essential to note that many options expire worthless, and understanding this can inform your trading strategy. We have calculated the trailing twelve-month volatility for Wingstop Inc to be 47%, taking into consideration the last 250 trading day closing values and the current price of $220.12. For additional call options ideas across various expiration dates, refer to the WING options page on StockOptionsChannel.com.

Market Activity Overview

In mid-afternoon trading on Tuesday, the S&P 500 components experienced a put volume of 896,230 contracts while call volume reached 1.51 million, resulting in a put:call ratio of 0.59 for the day. This figure indicates a preference for calls relative to puts, as it sits below the long-term median put:call ratio of 0.65. This trend shows that buyers have been favoring calls in options trading today.

Top YieldBoost Calls of the S&P 500 »

Also see:

• Funds Holding RVRS
• NVO Price Target
• ACF Videos

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