Maximizing Returns with Turning Point Brands: A Look at Income Strategies

Options Trading Opportunity for Shareholders

Shareholders of Turning Point Brands Inc (Symbol: TPB) may find an appealing opportunity to enhance their income beyond the stock’s modest 0.5% annualized dividend yield. They can consider selling a covered call option set for April 2025 at the $75 strike. By doing so, they could collect a premium at a bid price of $1.95, resulting in an annualized return of about 10.7% against the current stock price. This technique, known as YieldBoost at Stock Options Channel, would bring the total annualized rate to 11.2% if the stock is not called away.

However, if the stock climbs above $75, shareholders would not benefit from any gains beyond that point. This scenario requires the TPB shares to increase by 28.6% for the stock to be called away, which would still yield a return of 31.9% from the trading level, in addition to any dividends received prior to the option’s expiration.

Assessing Dividend Stability

It’s important to remember that dividend amounts can fluctuate based on a company’s profits. For Turning Point Brands Inc., examining the dividend history can provide insights into whether the current yield is sustainable. Below is a chart illustrating TPB’s dividend history.

Additionally, the chart below shows TPB’s trading history, highlighting the $75 strike in red.

When evaluating the option to sell the April 2025 covered call at the $75 strike, consider the historical volatility of the stock. This data, paired with fundamental analysis, aids in determining whether the potential rewards justify the risk of losing any upside beyond $75. The trailing twelve-month volatility for Turning Point Brands Inc is calculated to be 31%, based on the last 251 trading days and the current price of $58.44. For other contract ideas at various expirations, visit the TPB Stock Options page of StockOptionsChannel.com.

Current Market Activity

In mid-afternoon trading on Tuesday, the put volume among S&P 500 components reached 903,272 contracts, while call volume hit 1.98 million, producing a put:call ratio of 0.46. This figure shows a preference for call options, as it is significantly lower than the long-term median put:call ratio of 0.65.

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