Optimizing Your Returns with Covered Calls
Shareholders of Quanex Building Products Corp (Symbol: NX) have the opportunity to enhance their income beyond the stock’s current 1.1% annualized dividend yield by selling a December covered call at the $30 strike price. Selling at the 20 cents bid could yield an estimated 37.7% return based on the current stock price. When combined with the dividend, this could bring the total annualized return to approximately 38.9%. However, shareholders should be aware that any value above $30 would be forfeited if the stock is called away, necessitating an 8.5% increase in stock price for that outcome. Should the stock be called, shareholders would still enjoy a healthy 9.2% return from this trading level, in addition to any dividends accrued prior.
Understanding Dividend Consistency with Historical Data
Dividend payments can fluctuate, typically reflecting a company’s financial performance. To evaluate the stability of the recent dividend, it’s useful to refer to the dividend history for Quanex Building Products Corp. The following chart illustrates NX’s dividend activity, aiding in the assessment of whether the current 1.1% yield is sustainable.
Analyzing Trading Patterns and Stock Volatility
The accompanying chart visualizes NX’s trailing twelve-month trading history, with the $30 strike highlighted in red.
By examining the stock’s historical volatility alongside fundamental analysis, investors can evaluate whether selling a December covered call at $30 is a sound strategy, considering the potential risk of forfeiting price appreciation. The trailing twelve-month volatility for Quanex, based on the last 251 trading days and the current price of $28.37, is calculated to be 40%. For more options trading strategies with varying expirations, refer to the NX Stock Options page on StockOptionsChannel.com.
Current Market Trends in Options Trading
In mid-afternoon trading on Friday, put volume among S&P 500 components reached 892,483 contracts, while call volume was at 1.79 million, resulting in a put-to-call ratio of 0.50 for the day. This figure is significantly below the long-term median put-to-call ratio of 0.65, indicating an increase in call volume relative to puts. This suggests a trend where buyers favor calls in the current options trading environment.
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- High-Yield REITs
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- GOLD Average Annual Return
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
