Maximize Income with XP Inc’s Covered Call Strategy

Shareholders of XP Inc – Class A (Symbol: XP) might explore ways to enhance their income beyond the current stock‘s 5% annualized dividend yield. One possible strategy is to sell the August covered call at the $15 strike price, collecting the premium based on the 90 cents bid. This tactic could annualize to an additional 19.4% rate of return against the current stock price, resulting in a total potential annualized return of 24.4%, provided the stock is not called away. If the stock does rise above $15 and is called away, shareholders would lose any upside beyond that threshold. However, XP shares would need to increase by 14.6% from current levels for that to occur. In such a scenario, the shareholder would still realize a 21.5% return from this trading level, plus any dividends accrued before the stock was called.

Dividend payments can be unpredictable, as they often reflect a company’s profitability. For XP Inc – Class A, examining the dividend history chart below can provide insights into whether the most recent dividend is likely to continue and if maintaining a 5% annualized dividend yield is reasonable.

Below is a chart displaying XP’s trailing twelve-month trading history, with the $15 strike price highlighted in red:

The information in the chart, along with the stock‘s historical volatility, can guide investors in deciding whether selling the August covered call at the $15 strike provides an adequate reward for the risk of capping potential gains beyond that price. Many options expire worthless, and understanding this concept is crucial. We have calculated XP Inc – Class A’s trailing twelve-month volatility at 44%, taking into account the last 251 trading day closing values and today’s price of $13.09. For more call options contract ideas across various expiration dates, visit the XP Stock Options page at StockOptionsChannel.com.

In the mid-afternoon of Tuesday’s trading, put volume among S&P 500 components reached 1.17 million contracts, while call volume totaled 1.99 million, indicating a put-to-call ratio of 0.59 for the day. This figure shows a preference for calls compared to puts, as the long-term median put-to-call ratio is 0.65, suggesting heightened purchasing activity in call options today.

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Also see:

• VTAQ shares outstanding history
• CXM Average Annual Return
• DIN market cap history

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