Teekay Tankers Offers Covered Call Opportunity Amid Dividend Yield

Shareholders of Teekay Tankers Ltd (Symbol: TNK) can enhance their income beyond the stock’s 2.3% annual dividend yield by selling the November covered call at a $49 strike price. Investors can earn a premium with a $3.40 bid, which translates to an annualized return of 15.5% based on the current stock price. This strategy could yield a total return of 17.8% if the stock isn’t called away. However, any increase above $49 would result in lost upside. For the stock to be called away, TNK shares must rise by 11.9%, meaning shareholders could achieve a return of 19.7%, factoring in any dividends collected prior to the call.

Understanding dividend stability is crucial, as dividend amounts can be unpredictable and generally reflect each company’s profitability. Analyzing the dividend history chart for TNK below can help gauge future expectations for maintaining the 2.3% annual yield.

Below is a chart displaying TNK’s trailing twelve-month trading history, with the $49 strike highlighted in red:

The chart, along with the stock’s historical volatility, can aid investors in assessing whether selling the November covered call at the $49 strike provides sufficient rewards against the risks of missing out on further gains. Our calculations indicate the trailing twelve-month volatility for Teekay Tankers Ltd, considering the last 250 trading day closing values and the current price of $43.55, is 40%. For additional covered call options strategies with various expirations, visit the TNK options page.

In mid-afternoon trading on Thursday, S&P 500 components recorded a put volume of 765,270 contracts against call volume of 1.62 million, yielding a put:call ratio of 0.47. This figure indicates significantly higher call volume relative to puts, suggesting a preference for calls among buyers today.

For further analysis on trending call and put options, explore today’s most discussed options.

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