Maximizing Income: Booking Holdings’ Covered Call Strategy

Shareholders of Booking Holdings Inc (Symbol: BKNG) seeking to enhance their income beyond the stock’s current 0.9% annualized dividend yield might consider selling a January 2027 covered call at the $5250 strike price. By doing this, they can collect a premium based on the $456.00 bid, resulting in an annualized return of an additional 5.7% against the stock’s current price. This potential yield, referred to as YieldBoost by Stock Options Channel, brings the total annualized rate to 6.5% if the stock is not called away. However, should the stock rise above $5250, shareholders would forfeit any upside beyond that price. For this scenario to materialize, BKNG shares would need to appreciate by 20.3%. In the event the stock is called, shareholders would achieve a total return of 30.8% from the current trading level, plus any dividends received prior to the call.

Generally, predicting dividend amounts can be challenging as they often fluctuate alongside a company’s profitability. Analyzing the dividend history chart for BKNG, shown below, can provide insights into the likelihood of continuity in the dividend payout, helping investors understand the reasonableness of expecting a 0.9% annual yield.

The accompanying chart illustrates BKNG’s trailing twelve-month trading history, with the $5250 strike clearly highlighted in red:

This chart, alongside the stock’s historical volatility, serves as a useful tool in conjunction with fundamental analysis. It helps evaluate whether selling the January 2027 covered call at the $5250 strike offers a favorable risk-reward ratio for potentially giving up any upside beyond this price. For context, we calculate the trailing twelve-month volatility of Booking Holdings Inc at 26%, based on the last 250 trading days and the current price of $4347.56.

For additional call options contract ideas across various expirations, please visit the BKNG Stock Options page on StockOptionsChannel.com.

As of mid-afternoon trading on Wednesday, S&P 500 components showed 1.16 million put contracts compared to 2.09 million call contracts. This results in a put:call ratio of 0.56 for the day. The long-term median put:call ratio stands at 0.65, indicating that current trading shows a notable preference for calls among buyers.

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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.