Exploring Covered Calls and Their Earnings Potential
Shareholders of Tronox Holdings PLC (Symbol: TROX) seeking to enhance their income beyond the stock’s annualized dividend yield of 4.8% might consider selling the May 2025 covered call at the $12 strike. By doing so, they can collect a premium at a bid of 60 cents, which translates to an additional 14.8% rate of return based on the current stock price. This strategy is known as the YieldBoost; if the stock isn’t called away, this could lead to a total annualized rate of 19.5%. However, if the company’s stock price rises above $12, any gains beyond that would be forfeited. It is important to note that for the shares to be called, TROX has to increase by 14% from its current levels, resulting in a potential 19.7% return including dividends before the stock’s call.
Dividend amounts are often unpredictable and generally fluctuate with each company’s profitability. To better assess the sustainability of Tronox Holdings PLC’s dividend yield, shareholders can examine TROX’s dividend history chart provided below.
This chart displays TROX’s trailing twelve-month trading history, highlighting the $12 strike in red:
Using the above chart alongside the stock’s historical volatility can aid investors in determining if selling the May 2025 covered call at the $12 strike delivers good rewards for the risk of relinquishing any potential upside beyond $12. Notably, most options tend to expire worthless, and it’s useful to discuss common myths associated with options trading. Currently, the trailing twelve-month volatility for Tronox Holdings PLC, calculated from the last 251 trading day closing values and today’s price of $10.53, is 48%. For additional ideas on call options contracts with different expiration dates, visit the TROX Stock Options page on StockOptionsChannel.com.
During mid-afternoon trading on Thursday, the put volume among S&P 500 components was 709,347 contracts, while call volume reached 1.43 million. This resulted in a put:call ratio of 0.50 so far today. In contrast to the long-term median put:call ratio of 0.65, this indicates exceptionally high call volume compared to puts, suggesting that buyers are favoring calls in today’s options trading.
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For Further Insights:
- MATV market cap history
- Top Ten Hedge Funds Holding FYT
- Institutional Holders of RJF
The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.
