Maximizing Returns with a Covered Call Strategy
Shareholders of Argan Inc (Symbol: AGX) seeking to enhance their income beyond the stock’s 1.1% annualized dividend yield might consider selling a covered call option set for July 2025 at the $160 strike price. By doing so, they can capture a premium with a $17.00 bid, which translates to an annualized return of 22.4% based on the current stock price. This brings the total potential annualized return to 23.5% if the stock remains uncalled. However, if AGX’s shares increase beyond $160, the shareholder risks losing any gains above that threshold, which requires a 15.5% rise from its current price for a call to be exercised. If the stock is called away, the shareholder would still benefit from a total return of 27.8%, including any dividends accrued before the call.
It’s important to remember that dividend payouts can be unpredictable, often fluctuating with a company’s profitability. In the case of Argan Inc, examining the dividend history chart for AGX below may offer insights into whether the recent dividend will continue, thus providing a reasonable expectation of achieving a 1.1% annualized yield.
Below is a chart illustrating AGX’s trailing twelve months trading activity, featuring the highlighted $160 strike price in red:
The chart, combined with the stock’s historical volatility, can assist investors in determining whether selling the July 2025 covered call at the $160 strike price offers a favorable risk-reward ratio. A notable point is that most options do expire worthless, a common myth worth examining further. The trailing twelve-month volatility for Argan Inc, computed from the last 250 trading day closing prices and the current price of $138.66, stands at 48%. For additional ideas on call options with various expiration dates, visit the AGX Stock Options page on StockOptionsChannel.com.
During Monday’s mid-afternoon trading, S&P 500 components saw put volume at 921,700 contracts, while call volume reached 1.62 million, resulting in a put:call ratio of 0.57 for the day. This data suggests a higher preference for call options compared to puts, reflecting current market sentiments.
Explore Top YieldBoost Calls of the S&P 500 »
Also see:
- Auto Parts Dividend Stocks
- ND Videos
- RRAC Shares Outstanding History
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
