Argan Inc. Shareholders Consider Selling September Covered Calls

Shareholders of Argan Inc (Symbol: AGX) seeking to increase their income beyond the current Stock‘s 0.8% annualized dividend yield might consider selling a September covered call at the $180 strike price. By doing so, they can collect a premium based on a $20.40 bid, which annualizes to an additional 32.8% return relative to the current Stock price. This brings the total possible annualized return to 33.6%, assuming the Stock is not called away.

However, if the Stock rises above $180, the upside potential would be forfeited. AGX shares would need to increase by 2.1% from current levels for this scenario to occur. If the shares are called away, shareholders would realize a 13.7% return on the trading level, in addition to any dividends received prior to the call.

Dividend Considerations

Dividend amounts can fluctuate based on company profitability. For Argan Inc, examining the dividend history can provide insight into the sustainability of the recent dividend and help assess whether the 0.8% annualized yield is a reasonable expectation.

Trading History Overview

The following chart illustrates AGX’s trailing twelve-month trading history, highlighting the $180 strike in red:

This chart, alongside the Stock‘s historical volatility, can assist investors in evaluating whether selling the September covered call at the $180 strike offers a suitable risk-to-reward ratio. Historical data shows the trailing twelve-month volatility for Argan Inc, based on the last 250 trading days and the current price of $178.40, at 65%.

Market Activity Snapshot

As of mid-afternoon trading on Tuesday, the put volume among S&P 500 components totaled 1.07 million contracts, while call volume reached 2.39 million contracts. This equates to a put:call ratio of 0.45, indicating significantly higher call volume relative to puts—suggesting that traders are favoring calls in today’s options trading.

For insights on which 15 call and put options traders are discussing today, refer to additional resources.

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