The Online Investor
OLI Premium
Contrarian Outlook
Stock Option Ideas
Preferred Stock Newsletter
ChartZero.com
ChartZero

YieldBoost OFG To 13.5% Using Options

By The Online Investor Staff, Wednesday, January 15, 12:47 PM ET

Shareholders of OFG Bancorp (NYSE:OFG) looking to boost their income beyond the stock's 1.3% annualized dividend yield can sell the August covered call at the $22.50 strike and collect the premium based on the $1.55 bid, which annualizes to an additional 12.2% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 13.5% annualized rate in the scenario where the stock is not called away. Any upside above $22.50 would be lost if the stock rises there and is called away, but OFG shares would have to advance 5.9% from current levels for that to occur, meaning that in the scenario where the stock is called, the shareholder has earned a 13.2% 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 OFG Bancorp, looking at the dividend history chart for OFG 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 1.3% annualized dividend yield.

Below is a chart showing OFG's trailing twelve month trading history, with the $22.50 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 August covered call at the $22.50 strike gives good reward for the risk of having given away the upside beyond $22.50. (Do most options expire worthless? This and six other common options myths debunked). We calculate the trailing twelve month volatility for OFG Bancorp (considering the last 252 trading day closing values as well as today's price of $21.27) to be 33%. For other call options contract ideas at the various different available expirations, visit the OFG Stock Options page of StockOptionsChannel.com.

In mid-afternoon trading on Wednesday, the put volume among S&P 500 components was 1.25M contracts, with call volume at 2.16M, for a put:call ratio of 0.58 so far for the day. Compared to the long-term median put:call ratio of .65, that represents high call volume relative to puts; in other words, buyers are showing a preference for calls in options trading so far today. Find out which 15 call and put options traders are talking about today.

Find the right mix of model portfolios today at PortfolioChannel.com


This Article's Word Cloud:   Arial   August   Bancorp   Options   Stock   YieldBoost   above   afterLeftLabels   annualized   away   axisColor   background   beforeLeftLabels   beyond   bkgImage   bottomBuffer   bottomLabels   bottomTableHeight   call   called   chart   chartBackgroundColor   clientId   covered   current   dividend   document   escape   fillBelowLine   fillColor   fontFace   fontSize   from   gridBackgroundColor   gridColor   gridLocation   height   history   labelColor   labelSide   options   other   stock   strike   that   today   trading   volume   whether   with

YieldBoost OFG To 13.5% Using Options | www.TheOnlineInvestor.com | Copyright © 1998 - 2020, All Rights Reserved

Nothing in The Online Investor is intended to be investment advice, nor does it represent the opinion of, counsel from, or recommendations by BNK Invest Inc. or any of its affiliates, subsidiaries or partners. None of the information contained herein constitutes a recommendation that any particular security, portfolio, transaction, or investment strategy is suitable for any specific person. All viewers agree that under no circumstances will BNK Invest, Inc,. its subsidiaries, partners, officers, employees, affiliates, or agents be held liable for any loss or damage caused by your reliance on information obtained. By visiting, using or viewing this site, you agree to the following Full Disclaimer & Terms of Service. Video widget and stock market videos powered by Market News Video. Quote data delayed at least 20 minutes, powered by Ticker Technologies, and Mergent. Contact The Online Investor; Meet Our Editorial Staff.