Shareholders of Iridium Communications Inc. (Ticker: IRDM) can enhance their income by selling October covered calls at a $60 strike price. The current bid for this option is $7.40, which translates to an annualized rate of return of approximately 37%. Including the existing 1.2% dividend yield, shareholders could see a total annualized return of 38.2% if the stock is not called away.
Iridium’s stock is currently trading at $51.88, meaning a 16.8% increase would trigger the stock being called at the $60 strike. If this occurs, shareholders would achieve a total return of 31.2%, plus any dividends earned prior to the call. The company’s historical trading volatility is calculated at 61%, indicating a potentially favorable risk-reward scenario for option selling.
In broader market activity, as of Wednesday afternoon, S&P 500 options trading saw 2.84 million put contracts against 6.40 million call contracts, resulting in a put-to-call ratio of 0.44, significantly below the long-term median of 0.65, suggesting a strong preference for call options among traders.
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