Exploring NOV Inc’s Covered Call Strategy for Income Boost

Shareholders of NOV Inc (Symbol: NOV) can enhance their income beyond the stock’s 2.5% annualized dividend yield by selling the November covered call at the $13 strike. This strategy allows investors to collect a premium based on the $1.20 bid, which translates to an additional 16.7% annualized rate of return compared to the current stock price. Cumulatively, this can result in a total annualized rate of 19.1%, provided the stock is not called away. However, any upside above $13 would be forfeited if the stock is called. Notably, this would require NOV shares to rise at least 8.8% from current levels to reach that strike price, yielding an 18.8% return from this trading level, in addition to dividends collected if the stock is called.

Understanding Dividend Stability

Dividend amounts are not always predictable and can fluctuate based on a company’s profitability. For investors in NOV Inc, reviewing the dividend history chart below can provide insight into whether the recent dividend is likely to continue, thus helping to assess the expectation of maintaining a 2.5% annualized yield.

NOV’s Trading History Visualization

The following chart displays NOV’s trailing twelve-month trading history, with the $13 strike clearly marked in red:

This chart, combined with the stock’s historical volatility, aids in evaluating whether selling the November covered call at the $13 strike presents a favorable risk-reward scenario. The trailing twelve-month volatility for NOV Inc, based on closing values from the last 251 trading days and the current price of $12.06, is calculated at 41%. To explore various call option contracts with different expirations, visit the NOV Stock Options page on StockOptionsChannel.com.

Current Market Activity Analysis

During mid-afternoon trading on Tuesday, the put volume among S&P 500 components reached 713,693 contracts, while call volume tallied 1.19 million contracts. This resulted in a put-to-call ratio of 0.60 for the day. This figure indicates high call volume relative to puts, suggesting a strong preference for calls among buyers in the options market today.

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