Maximizing Returns with Vestis Corp’s Covered Call Strategy

Explore the Potential of Selling Covered Calls to Enhance Income

Shareholders of Vestis Corp (Symbol: VSTS) seeking to increase their earnings beyond the stock’s modest 0.8% annualized dividend yield can consider selling a covered call for February at a $17.50 strike price. This strategy would allow investors to collect a premium based on a 50 cents bid, which translates into an impressive potential additional return of 24.9% when annualized. If the stock price remains unchanged, this would lead to a total annualized return of 25.8%. However, should the stock rise above $17.50, shareholders risk losing any gains beyond that threshold. Currently, VSTS shares would need to increase by 7.5% for the stock to be called, which would still yield a respectable 10.6% return when combined with any dividends received prior to the call.

It’s important to note that dividend amounts can fluctuate based on each company’s profit performance. To better assess whether Vestis Corp’s most recent dividend will hold, reviewing the dividend history chart for VSTS provides insight. Notably, a 0.8% annualized dividend yield is contingent on maintaining profitability.

Below is a chart outlining VSTS’s trailing twelve months trading history, with the $17.50 strike clearly marked in red:

The above chart, combined with the stock’s historical volatility, serves as a useful reference for evaluating whether the February covered call at the $17.50 strike offers adequate returns for the risk of forfeiting potential upside. Vestis Corp’s volatility, based on the past 251 trading days and today’s price of $16.39, stands at 73%. For alternative call option strategies across various expiration dates, visit the VSTS Stock Options page on StockOptionsChannel.com.

During mid-afternoon trading on Tuesday, the S&P 500 saw put volume reach 1.08 million contracts, while call volume climbed to 2.62 million, reflecting a put:call ratio of 0.41 for the day. Compared to the long-term median put:call ratio of 0.65, today’s volume indicates a strong preference for call options among buyers.

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• SEAT shares outstanding history
• DPD Videos
• BTDR Options Chain

The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.