Alight Inc (ALIT) Offers Income Boost Through Covered Calls

Shareholders of Alight Inc (Symbol: ALIT) seeking to enhance their income beyond the stock’s 2.8% annualized dividend yield can consider selling the November covered call with a $7 strike price. By doing so, they can collect a premium of 25 cents per share, which equates to an additional 8.8% return based on the current stock price. This strategy results in a total potential annualized rate of 11.6%, assuming the stock is not called away. However, if the stock appreciates above $7, shareholders would forfeit any gains beyond this price. ALIT shares would need to increase by 24.3% for this scenario to occur, leading to a total return of 28.8% from present levels, in addition to any dividends received prior to the stock being called.

Dividend amounts fluctuate due to company profitability. Analyzing Alight Inc’s dividend history can help determine if the recent 2.8% annualized yield is sustainable in the future. Below, a chart illustrates ALIT’s dividend history:

The next chart depicts ALIT’s trading history over the past twelve months, highlighting the $7 strike in red:

This data, along with ALIT’s historical volatility, provides a resourceful context for evaluating whether selling the November covered call at the $7 strike presents a suitable risk-reward balance. Our assessment shows the trailing twelve-month volatility for Alight Inc, based on the last 250 trading days and the current price of $5.64, to be 40%. For additional call option strategies and expirations, refer to the ALIT options page.

In mid-afternoon trading on Wednesday, S&P 500 put volume stood at 676,775 contracts, while call volume reached 1.23 million, yielding a put-call ratio of 0.55. This figure indicates significantly higher call volume relative to puts compared to the long-term median ratio of 0.65, suggesting a preference for call options among buyers today.

To explore which specific call and put options are attracting today’s traders, further insights can be found in the broader market trends.

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