Public Service Enterprise Group Inc (PEG) shareholders can enhance their income beyond the 3% annualized dividend yield by selling covered calls at a $95 strike price with a January 2027 expiration. This strategy allows them to collect a premium of $5.00, which translates to an additional 4% return. If the stock is not called away, this could yield a total annualized rate of 6.9%. However, if PEG shares exceed the $95 threshold, shareholders stand to lose potential upside but could still achieve a total return of 17.4% if called, given they invested at the current price of $85.28.
As of mid-afternoon trading on Tuesday, the put volume among S&P 500 components reached 1.01 million contracts, while call volume hit 1.67 million, resulting in a put:call ratio of 0.60. This indicates a higher preference for call options relative to puts compared to the long-term median ratio of 0.65, reflecting a bullish sentiment in the market.
The historical volatility for PEG over the last 250 trading days stands at 23%, which can aid investors in assessing the associated risks of the covered call strategy.
