Maximize Income with Magnolia Oil & Gas Corp’s Covered Call Strategy
Shareholders of Magnolia Oil & Gas Corp (Symbol: MGY) seeking to increase their income may consider selling the December covered call at the $25 strike price. By doing so, they could collect a premium based on the $1.35 bid. This premium translates to an additional annualized return of 10.4% at the current stock price. If the stock is not called away, shareholders could achieve a total annualized return of 13%. Any upside beyond $25 would be forfeited if the stock reaches that price and is called away. However, for this to happen, MGY shares would need to rise 12% from their current levels. Should the stock be called away, investors would realize an 18.1% return, plus any dividends accrued before the call occurred.
Dividends can be unpredictable and fluctuate based on each company’s profitability. To evaluate the likelihood of continuing MGY’s recent dividend, reviewing the dividend history chart below may provide insights into whether a 2.7% annualized dividend yield is reasonable to expect.
The chart below illustrates MGY’s trailing twelve-month trading history, highlighting the $25 strike in red:
The information presented in the chart and the historical volatility of the stock can guide investors in combining fundamental analysis with strategic decisions about the December covered call at the $25 strike price. The historical volatility for Magnolia Oil & Gas Corp is calculated at 38%, based on the past 250 trading days and the current price of $22.36. For alternative call options contracts at various expiration dates, refer to the MGY options page.
In mid-afternoon trading on Tuesday, the put volume among S&P 500 components reached 705,861 contracts, while call volume stood at 1.56 million, yielding a put-to-call ratio of 0.45. This signifies significantly high call volume relative to puts, indicating that buyers currently favor calls in options trading.
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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.
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