Unlocking Additional Earnings with Covered Calls
Shareholders of WK Kellogg Co (Symbol: KLG) can potentially increase their income beyond the current stock’s annualized dividend yield of 3.1%. By selling a June 2025 covered call option at the $22.50 strike price, investors can collect a premium that is currently bid at $1.70. This strategy could yield an extra 15.8% return against KLG’s current stock price, resulting in a total potential annualized return of 18.8% if the stock isn’t called away. Should the stock price exceed $22.50, shares will likely be called away, but an 8% rise from the current levels would trigger this. In that case, shareholders would still realize a 16.1% gain, which accounts for the initial stock price as well as any dividends earned before the shares were called.
Assessing WK Kellogg’s Dividend Stability
Dividends are unpredictable and tend to fluctuate with each company’s profitability. To evaluate the sustainability of WK Kellogg Co’s dividend, examining its historical dividend chart below can provide insight into whether the recent 3.1% yield is likely to continue.
Analyzing KLG’s Historical Trading Performance
The following chart illustrates WK Kellogg’s trading history over the last twelve months, with the $22.50 strike clearly marked in red:
This chart, along with the stock’s volatility record, serves as a significant tool when considering the sale of the June 2025 covered call at the $22.50 strike. It is wise to evaluate the possible risks involved with forgoing potential gains above this price. Currently, the trailing twelve-month volatility for WK Kellogg Co is calculated at 43%, based on the last 251 trading days and the present price of $20.86. For further options strategies regarding varying expiration dates, refer to the KLG Stock Options page on StockOptionsChannel.com.
Activity in the S&P 500 Options Market
During mid-afternoon trading on Friday, the S&P 500 options market observed a total of 892,483 put contracts and 1.79 million call contracts, resulting in a put-to-call ratio of 0.50 for the day. This figure indicates significantly higher call volume when compared to the long-term median put-to-call ratio of 0.65, suggesting a strong preference among buyers for call options today.
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The views and opinions expressed herein are those of the author and do not necessarily reflect the views of Nasdaq, Inc.
