Maximizing Gains with Church & Dwight: A Look at Covered Calls
For shareholders of Church & Dwight Co Inc (Symbol: CHD), there’s an opportunity to enhance income from the stock beyond its current 1.1% annualized dividend yield. By selling a covered call for April 2025 at a $125 strike price, investors can collect a bid premium of 75 cents. This translates to an additional 1.6% return based on the current stock price. If the stock isn’t called away, the expected total return would be 2.7% annually. However, any gains above $125 will be forfeited if the stock price rises to that level—requiring a 16.1% upward movement from current levels. In such a case, a shareholder would realize a 16.8% return from this trading strategy, in addition to dividends accrued before the stock is called.
Dividends can fluctuate, influenced heavily by a company’s profitability. Thus, examining Church & Dwight’s dividend history is vital to assessing the likelihood of maintaining the current 1.1% yield. A look at the dividend history chart below provides insight into this consistency:
The chart below illustrates CHD’s trailing twelve-month trading history, with the $125 strike highlighted:
Analyzing the chart alongside CHD’s historical volatility can help investors evaluate whether selling the covered call at the $125 strike offers a suitable risk-reward balance. The calculated twelve-month volatility for Church & Dwight, based on the last 251 trading days and the current price of $107.65, stands at 17%. For additional call options strategies at various expirations, interested investors can consult the CHD Stock Options page at StockOptionsChannel.com.
On Wednesday afternoon, trading volumes revealed an active day for options among S&P 500 stocks, with 821,671 put contracts and 1.65 million call contracts, yielding a put-call ratio of 0.50. This suggests strong buyer preference for call options compared to the long-term median ratio of 0.65.
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Also see:
- Institutional Holders of EIV
- Eli Lilly 13F Filers
- Pool YTD Return
The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.
