Norfolk Southern Corp: Maximizing Returns with Covered Calls
Options Strategy: The January 2027 Covered Call
Shareholders of Norfolk Southern Corp (Symbol: NSC) seeking to increase their income beyond the stock’s current 2.3% annualized dividend yield might consider selling a January 2027 covered call at the $290 strike. By doing so, investors can collect a premium at a $14.80 bid, which translates to an additional 3.1% rate of return on top of the existing yield. This results in a potential total annualized return of 5.4%, provided that the stock price does not exceed $290.
However, shareholders need to be aware that any increase above $290 means the stock could be called away. Currently, Norfolk Southern shares would need to rise by 23.2% for this condition to be triggered. In this scenario, the shareholder would still end with a substantial 29.5% return from this trading level, in addition to any dividends accrued before the stock was called.
Evaluating Dividend Stability
Understanding the stability of dividends is crucial, as they can vary based on a company’s profitability. For Norfolk Southern Corp, analyzing the company’s dividend history is essential to evaluate the likelihood of maintaining the 2.3% annualized yield.
Stock Price Dynamics and Historical Context
The chart below illustrates NSC’s trailing twelve-month trading history, with the $290 strike price highlighted for clarity:
This visual representation, along with the stock’s historical volatility, can assist in determining whether the January 2027 covered call at the $290 strike offers a favorable balance of risk and reward. The trailing twelve-month volatility for Norfolk Southern Corp is 27%, calculated from the past 251 trading days and the current price of $234.93. For further options contract ideas and different expiration dates, visit the NSC Stock Options page on StockOptionsChannel.com.
Current Options Market Trends
In mid-afternoon trading on Thursday, the total put volume among S&P 500 components reached 1.03 million contracts, while call volume was at 1.91 million, resulting in a put:call ratio of 0.54 for the day. This indicates notably high call volume relative to puts, as the long-term median put:call ratio sits at 0.65. Such figures suggest that options traders are favoring calls at this time.
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Also see:
– HTHT market cap history
– Expeditors International of Washington RSI
– KIM Insider Buying
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
