Explore how to enhance your income potential with NGVC’s covered calls
Shareholders of Natural Grocers By Vitamin Cottage Inc (Symbol: NGVC) seeking to increase their income beyond the stock’s 1.1% dividend yield can consider selling the March 2025 covered call at a $45 strike price. By securing the premium of $3.40, investors can anticipate an annualized return of 28.7% based on the current stock price. This combined with the existing yield would result in a total annualized rate of 29.8%, assuming the stock remains uncalled. However, if the stock rises above $45, any extra gains would not be realized. This would only occur if the stock increases by 2.9% from its present value. In that scenario, shareholders would enjoy a 10.7% return from this trading strategy, plus any dividends accrued prior to the stock being called away.
Dividend amounts often fluctuate based on a company’s profitability. Reviewing the dividend history for Natural Grocers can offer insights into whether the recent dividend is sustainable and if a 1.1% annualized yield is realistic for the future.
Illustrated below is NGVC’s trading history over the past twelve months, with the $45 strike indicated in red:
By analyzing the above chart along with the stock’s historical volatility, investors can assess whether selling the March 2025 covered call at the $45 strike price presents a worthy risk-reward scenario. For context, the trailing twelve-month volatility for Natural Grocers, based on the last 251 trading days and the current price of $44.11, is calculated at 48%. For additional call option strategies at various expiration dates, refer to the NGVC Stock Options page on StockOptionsChannel.com.
During mid-afternoon trading on Thursday, S&P 500 put volume reached 948,870 contracts, while call volume surged to 2.22 million, leading to a put/call ratio of 0.43 for the day. This high call volume indicates a strong preference among buyers for calls compared to puts, which is significant given the long-term median put/call ratio of 0.65.
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The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.
