HomeMarket NewsYieldBoost RITM From 8.8% To 1217.8% Using Options

YieldBoost RITM From 8.8% To 1217.8% Using Options

Actionable Trade Ideas

always free

Shareholders of Rithm Capital Corp (Symbol: RITM) looking to boost their income beyond the stock’s 8.8% annualized dividend yield can sell the July covered call at the $17 strike and collect the premium based on the $22.20 bid, which annualizes to an additional 1209% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 1217.8% annualized rate in the scenario where the stock is not called away. Any upside above $17 would be lost if the stock rises there and is called away, but RITM shares would have to climb 49.6% from current levels for that to occur, meaning that in the scenario where the stock is called, the shareholder has earned a 245.1% return from this trading level, in addition to any dividends collected before the stock was called.

In general, dividend amounts are not always predictable and tend to follow the ups and downs of profitability at each company. In the case of Rithm Capital Corp, looking at the dividend history chart for RITM below can help in judging whether the most recent dividend is likely to continue, and in turn whether it is a reasonable expectation to expect a 8.8% annualized dividend yield.


Below is a chart showing RITM’s trailing twelve month trading history, with the $17 strike highlighted in red:


The chart above, and the stock’s historical volatility, can be a helpful guide in combination with fundamental analysis to judge whether selling the July covered call at the $17 strike gives good reward for the risk of having given away the upside beyond $17. (Do most options expire worthless? This and six other common options myths debunked). We calculate the trailing twelve month volatility for Rithm Capital Corp (considering the last 251 trading day closing values as well as today’s price of $11.34) to be 21%. For other call options contract ideas at the various different available expirations, visit the RITM Stock Options page of StockOptionsChannel.com.

In mid-afternoon trading on Tuesday, the put volume among S&P 500 components was 637,713 contracts, with call volume at 1.27M, for a put:call ratio of 0.50 so far for the day. Compared to the long-term median put:call ratio of .65, that represents very high call volume relative to puts; in other words, buyers are preferring calls in options trading so far today.
Find out which 15 call and put options traders are talking about today.

nslideshow Top YieldBoost Calls of the Mortgage REITs Β»

Also see:

Β• Preferreds of SAFE Dividend Stocks
Β• Top Ten Hedge Funds Holding TNET
Β• NDAQ Technical Analysis

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

Swing Trading Ideas and Market Commentary

Need some new swing ideas? Get free weekly swing ideas and market commentary from Jonathan Bernstein here: Swing Trading.

Explore More

Weekly In-Depth Market Analysis and Actionable Trade Ideas

Get institutional-level analysis and trade ideas to take your trading to the next level, sign up for free and become apart of the community.