Maximize Your Income: Exploring Options with Red Rock Resorts

Shareholders of Red Rock Resorts Inc (Symbol: RRR) have an opportunity to enhance their income beyond the stock’s annualized dividend yield of 2.2%. By selling the October covered call at the $49 strike, investors can collect a premium of $2.85. This translates to an annualized return of 15.1% against the current stock price, referred to as the YieldBoost. If the stock is not called away, shareholders could see a total annualized return of 17.3%. However, any rise above $49 would result in forfeited gains. For the stock to be called away, RRR shares must appreciate 6.9% from their current levels. In that case, the total return would still stand at 13.1%, factoring in any dividends received prior to the stock’s call.

Understanding dividend variability is crucial, as they often fluctuate according to a company’s profitability. Evaluating Red Rock Resorts’ dividend history can offer insights on whether the latest dividend is sustainable and if a 2.2% yield is a reasonable expectation for shareholders.

A complete view of RRR’s trailing twelve-month trading history provides valuable context, especially with the $49 strike marked in red:

This trading chart, along with RRR’s historical volatility can serve as useful tools, complementing fundamental analysis. Analyzing whether selling the October covered call at the $49 strike offers adequate reward for the risk associated with foregoing potential upside is essential. Over the last 250 trading days, we calculated the trailing twelve-month volatility for Red Rock Resorts to be 36%. Investors seeking further options strategies at varying expirations can explore the RRR Stock Options page.

As of Tuesday afternoon trading, the put volume for S&P 500 components reached 705,861 contracts, while call volume stood at 1.56 million, resulting in a put-to-call ratio of 0.45. This figure is notably lower than the long-term median put-to-call ratio of 0.65, indicating significantly higher call volume—suggesting that traders are favoring calls in today’s options activity.

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