AAON Shareholders: Exploring Covered Call for Higher Returns
For shareholders of AAON, Inc. (Symbol: AAON) seeking to enhance their income beyond the stock’s 0.4% annualized dividend yield, an option exists. They can sell an October covered call at the $105 strike price. By doing this, they may collect a premium based on the $7.90 bid. This strategy could yield an additional 18.4% rate of return, bringing the total potential annualized return to 18.8% if the stock remains uncalled. However, should the stock exceed the $105 mark, any upside beyond this would be forfeited. Currently, AAON shares would need to increase by 9.3% for this condition to be met, resulting in a 17.5% overall return for shareholders if the stock is called, alongside any dividends received prior to the call.
Dividend amounts can fluctuate, closely tied to a company’s profitability. In the case of AAON, reviewing the historical dividend chart can provide insights into the likelihood of future dividends sustaining the current 0.4% yield expectation.
Furthermore, the chart below illustrates AAON’s trading history over the past twelve months, with the $105 strike highlighted in red:
Utilizing both the trading history and historical volatility can aid in assessing whether selling the October covered call at the $105 strike presents a favorable risk-reward scenario. According to calculations, the trailing twelve-month volatility for AAON, considering the last 250 trading days and the current price of $96.15, stands at 53%. For insights on other call options strategies with various expirations, refer to the AAON Stock Options page.
As of mid-afternoon trading on Wednesday, put volume among S&P 500 components reached 595,395 contracts, while call volume totaled 1.04 million, resulting in a put-call ratio of 0.57. This figure is notably lower than the long-term median ratio of 0.65, indicating a preference for call options among buyers today.
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Additional Resources:
- MLPs Hedge Funds Are Selling
- TTAN Options Chain
- RTIX Market Cap History
The views and opinions expressed herein are those of the author and do not necessarily reflect the views of Nasdaq, Inc.
