Louisiana-Pacific Corp Offers Strategic Covered Call Opportunity

Shareholders of Louisiana-Pacific Corp (Symbol: LPX) looking to enhance their income beyond the stock’s annualized dividend yield of 1.2% can consider selling a November covered call with a $100 strike price. With a bid premium of $6.10, this strategy could generate an additional annualized return of 12.5% based on the current stock price. If the stock is not called away, this brings the total potential annualized return to 13.7%. However, any gain above $100 would be forfeited if the stock price rises to that level and the option is exercised. Currently, LPX shares would need to increase by 9.8% for that to occur, which would result in a 16.5% overall return for shareholders, factoring in dividends collected prior to the call.

Dividend amounts can vary due to company profitability cycles. For Louisiana-Pacific Corp, analyzing the dividend history chart for LPX can provide insight into the likelihood of sustaining the most recent dividend and achieving the anticipated 1.2% annualized yield.

Below is a chart detailing LPX’s trailing twelve months of trading history, highlighting the $100 strike in red:

This chart, alongside the stock’s historical volatility, can aid investors in determining whether selling the November covered call at the $100 strike presents a worthwhile risk-reward profile. Based on the last 250 trading day closing values and the current price of $90.66, Louisiana-Pacific Corp’s trailing twelve-month volatility stands at 34%. For additional call options contract ideas with various expirations, investors can reference the LPX options page at StockOptionsChannel.com.

In mid-afternoon trading on Friday, the put volume among S&P 500 components reached 2.32 million contracts, while call volume hit 4.00 million, resulting in a put-call ratio of 0.58. This is notably high compared to the long-term median put-call ratio of 0.65, indicating a strong preference for calls among options traders today.

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