Enhancing Income with Columbus McKinnon Corp.’s Covered Call Strategy
Income Beyond the 1.4% Dividend Yield
Shareholders of Columbus McKinnon Corp. (Symbol: CMCO) aiming to increase their returns beyond the stock’s 1.4% annual dividend yield can consider selling the March covered call at the $22.50 strike price. They can receive a premium of 50 cents per share, equating to an impressive annualized return of 28.7% based on today’s stock price. In total, this strategy could yield a 30.1% annualized rate if the stock remains below $22.50 and is not called away. If the stock price surpasses $22.50, any extra gains will be forfeited. However, CMCO shares would need to increase by 9.5% for that to occur. Even in a called scenario, shareholders would still benefit from an 11.9% return, plus any dividends accrued prior to the call.
Understanding Dividend Stability
Dividend amounts are often unpredictable, fluctuating with corporate profitability. For investors in Columbus McKinnon Corp., examining the company’s dividend history is essential. The chart below illustrates CMCO’s dividend trends, allowing shareholders to assess the likelihood of maintaining the current 1.4% annual yield effectively.
Assessing Stock Performance and Volatility
The following chart displays CMCO’s trading history for the past twelve months, with the $22.50 strike highlighted in red:
Combining the previous chart and the stock’s historical volatility helps in analyzing whether selling the March covered call is a worthwhile strategy given the potential risk of losing upside gains beyond $22.50. Columbus McKinnon Corp.’s trailing twelve-month volatility, considering the last 249 trading days and the current price of $20.42, is calculated to be 62%. For various other call option contract ideas and expirations, please visit the CMCO Stock Options page on StockOptionsChannel.com.
Market Dynamics in Options Trading
During mid-afternoon trading on Tuesday, put volume among S&P 500 components recorded at 2.29 million contracts, while call volume reached 4.97 million, resulting in a put-to-call ratio of 0.46 for the day. This figure shows a notably high call volume in comparison to the long-term median put-call ratio of 0.65, indicating that more investors are leaning towards calls in the current options trading environment.
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Additional Resources:
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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
