Shareholders of Genuine Parts Co. (Symbol: GPC) have options to increase their income beyond the stock’s current 3.4% annual dividend yield. One strategy involves selling a May covered call at the $120 strike price. This move would allow investors to collect a premium of $6.90, which translates to an additional annualized return of 22.4% based on the current stock price. If the stock remains uncalled, shareholders could achieve a total annualized return of 25.8%. However, should GPC exceed the $120 mark, any upside would be forfeited if the stock is called. GPC shares would need a rise of 1.4% from current levels for this to occur, resulting in a still respectable 7.3% return, plus dividends collected before the call.
In general, dividend payments can fluctuate, influenced by a company’s profitability. Analyzing Genuine Parts Co.’s dividend history is essential for assessing the reliability of the current 3.4% annual yield.
Displayed below is GPC’s trading history over the last year, with the $120 strike highlighted in red:
This chart, combined with the stock’s historical volatility, serves as a valuable resource when considering the sale of a May covered call at the $120 strike. An essential aspect is whether the potential returns justify the risk of sacrificing any gains above the $120 mark. Currently, Genuine Parts Co. has a trailing twelve-month volatility of 33%, calculated from the last 249 trading session closing values and today’s price of $117.94. For alternative call option contract ideas across various expiration dates, please check out the GPC Stock Options page on StockOptionsChannel.com.
During mid-afternoon trading on Monday, the put volume among S&P 500 components amounted to 1.21 million contracts, while call volume reached 2.33 million, resulting in a put:call ratio of 0.52 for the day. This figure indicates a strong preference for call options compared to puts, considering the long-term median put:call ratio is 0.65. Thus, option buyers are demonstrating a notable inclination towards call trading on this day.
Stay updated on which 15 call and put options traders are discussing 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.
