Exploring Valley National Bancorp’s Options for Higher Returns
Maximizing Income with Covered Calls
Shareholders of Valley National Bancorp (Symbol: VLY) have a unique way to enhance their earnings beyond the stock’s current 4.1% annual dividend yield. They can choose to sell a January 2026 covered call at the $12 strike price, earning a premium of $1.10. This premium could represent an additional annualized return of 9%, bringing the total potential yield to 13.1% if the stock is not called away. However, should VLY shares surge above $12, any gains beyond this threshold will be forfeited. This would require the stock to increase by 11.9%, resulting in a total return of 22.2% if called, plus any dividends received during the holding period.
Evaluating Dividend Sustainability
It’s crucial to note that dividends aren’t always stable and can fluctuate based on a company’s profitability. Analyzing Valley National Bancorp’s dividend history can shed light on whether the recent yield of 4.1% is sustainable in the long run.
Understanding Trading History and Volatility
Enjoying a comprehensive trading history aids in decision-making. The following chart illustrates VLY’s recent performance, highlighting the $12 strike in red:
This chart, together with VLY’s historical volatility, serves as a valuable resource when considering the risk and reward of selling a covered call at the $12 strike. In the last 252 days, Valley National Bancorp’s volatility was calculated at 44%. For additional options strategies with varying expiration dates, check out the VLY Stock Options page on StockOptionsChannel.com.
Current Trading Trends
On Tuesday afternoon, trading activity among S&P 500 components showed a put volume of 1.04 million contracts compared to 2.06 million for calls, resulting in a put:call ratio of 0.50. This figure indicates a strong preference for call options, highlighting a bullish sentiment among traders relative to long-term trends.
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Also see:
- Warren Buffett Energy Stocks
- Institutional Holders of UDF
- Institutional Holders of IGU
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
