VSE Corp. Shareholders Can Enhance Income with Covered Calls

Shareholders of VSE Corp. (Symbol: VSEC) seeking to increase their income beyond the 0.3% annualized dividend yield may consider selling an October covered call at the $135 strike price. By doing so, they can collect a premium based on the $9.80 bid, which translates to an additional annualized return of 17.6% relative to the current stock price. This strategy, referred to as “YieldBoost,” leads to a total potential return of 18% annualized, assuming the stock is not called away. Should VSE shares rise above $135, any gains above that level would not be realized. At the current levels, this would require an 8.5% increase in VSEC shares for the option to be exercised. In this scenario, shareholders would still benefit from a 16.4% return, plus any dividends accrued prior to the stock being called.

Dividend payments can fluctuate and typically reflect each company’s profitability. Analyzing VSE Corp.’s dividend history can provide insights on whether its recent dividend is likely to be sustained, and whether the 0.3% annualized dividend yield remains a realistic expectation.

The following chart illustrates VSEC’s trading history over the past twelve months, with the $135 strike price highlighted in red:

This chart, combined with VSEC’s historical volatility, serves as a useful tool for assessing whether selling covered calls at the $135 strike price is a worthwhile strategy compared to the risk of losing any potential upside beyond that point. The trailing twelve-month volatility for VSE Corp., calculated using the last 250 trading days and the current price of $123.31, is 47%. For additional call options ideas with various expirations, please refer to the VSEC stock options page.

During mid-afternoon trading on Wednesday, the put volume among S&P 500 companies was reported at 595,395 contracts, while call volume reached 1.04 million, resulting in a put:call ratio of 0.57 for the day. This figure indicates relatively high call activity compared to puts, suggesting that buyers are leaning towards calls in today’s options trading.

Top YieldBoost Calls of the S&P 500 »

Additional Information:

• Funds Holding THM
• BUG Average Annual Return
• BSFC Videos

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