Maximizing Total Returns with a $130 Strike Option
Shareholders of Camden Property Trust (Symbol: CPT) looking to enhance their income beyond the stock’s 3.4% annual dividend yield can opt for a covered call strategy. By selling the May 2025 covered call at the $130 strike, investors can collect a premium based on the $2.00 bid. This action yields an approximate additional return of 3.3%, resulting in a total annualized return of 6.6%, assuming the stock isn’t called away. However, any price increase above $130 means the stock would be called, resulting in a 7.9% return when factoring in dividends, provided the stock climbs 6.3% from current levels.
Historically, dividends are not always predictable; they fluctuate with a company’s profitability. Analyzing Camden Property Trust’s dividend history can be beneficial in assessing the likelihood of maintaining the current 3.4% annual yield.
The chart below illustrates CPT’s trading history over the last twelve months, with the $130 strike indicated in red:
This previous performance, combined with the stock’s volatility, is a useful tool for evaluating whether selling the May 2025 covered call at the $130 strike offers a suitable reward for the risk of upside loss beyond that strike. Over the last year, Camden Property Trust has experienced a historical volatility of 21%, based on 251 days of trading data along with the current price of $122.32. For more call options ideas with various expiration dates, visit the CPT Stock Options page on StockOptionsChannel.com.
On Thursday afternoon, the trading activity reflected a significant interest in options; the put volume among S&P 500 components reached 981,376 contracts, while call volume hit 1.82 million. This results in a put:call ratio of 0.54, indicating strong call buying relative to puts when compared to the long-term median ratio of 0.65.
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The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.
