Exploring Covered Calls for Enhanced Income
Shareholders of Vishay Intertechnology, Inc. (Symbol: VSH) have an opportunity to increase their income beyond the current 2.5% annualized dividend yield. By selling a December covered call at the $22.50 strike price, they can collect a premium based on the 85 cents bid. This strategy could provide an additional 5.6% return based on today’s stock price—a concept referred to as YieldBoost. If the stock is not called away, this could result in a total annualized return of 8.1%. However, if the stock price exceeds $22.50, any gains above this threshold would be forfeited. This would require VSH shares to rise 38.5% for the call to be exercised. In such a case, shareholders could realize a 43.7% return from this trading level, along with any dividends earned prior to the stock being called away.
Typically, dividends can be unpredictable and often fluctuate with a company’s profitability. To assess whether VSH can maintain its recent dividend, examining its dividend history is essential. The chart below assists in determining the likelihood of continuing the current 2.5% annualized yield.
Next is a chart depicting VSH’s trailing twelve-month trading history, with the $22.50 strike price emphasized in red:
The above chart and VSH’s historical volatility can provide insight into whether selling the December covered call at the $22.50 strike price offers a favorable balance of risk and reward. While many options do expire worthless, understanding this dynamic can help investors make informed decisions. The trailing twelve-month volatility for Vishay Intertechnology, Inc.—calculated from the last 249 trading days and the current price of $16.14—is 33%. For additional call options with varying expiration dates, visit the VSH Stock Options page on StockOptionsChannel.com.
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Also see:
- DRYS Options Chain
- PIPP Options Chain
- VTR Historical Stock Prices
The views and opinions expressed herein are those of the author and do not necessarily reflect those of Nasdaq, Inc.
