With shares still trading above my purchase price of $53.74, yesterday seemed like a good time to make another high-yield trade with Nike (NKE).
My trade involved selling one January 19, 2018 $55 call for $4.86 per share.
I sold this call on 100 of the 200 shares I purchased for $53.74 per share during a previous high-yield trade.
Now that the stock is trading handily above my purchase price, I’m simply selling another round of calls on those same shares to generate additional income.
I sold one call option on these shares a few days ago and generated $3.39 per share in income for a $339 instant payout. I wrote about that trade here.
Today, I’m selling another option on the remaining 100 shares I own. Since Nike’s stock price has risen since my trade just a few days ago, there is now more intrinsic value priced in the options premium, so this new trade will generate even more income ($4.86 per share for a $486 cash payout).
There are likely two ways this new trade will work out — and they both spell at least double-digit annualized yields on my purchase price…
Scenario #1: NKE stays under $55 by January 19
If NKE stays under $55 by January 19 I’ll get to keep my 100 shares.
In the process, I’ll also have received $486 in call income ($4.86 x 100 shares).
The call income — known as a “premium” in the options world — was collected instantly yesterday.
It was deposited in the account where I made the trade, which is my 401k retirement account.
At the end of the day, if “Scenario 1″ plays out I’ll be looking at $480.40 in profit after commissions.
On a percentage basis, I received an instant 6.3% yield for selling the call ($4.86 / $53.74).
When I subtract out the commissions I’m looking at an 8.9% yield in 59 days… which works out to a 55.3% annualized yield.
Scenario #2: NKE climbs over $55 by January 19
If NKE climbs over $55 by January 19, my 100 shares will get sold (“called away”) at $55 per share.
In “Scenario 2″ — like “Scenario 1″ — I get to keep the $486 in call income ($4.86 x 100 shares). I’ll also generate $126 in capital gains ($1.26 X 100) because I bought at $53.74 and will be selling at $55.
In this scenario, after commissions I’ll be looking at a $601.45 profit.
From a percentage standpoint, this high-yield trade will deliver an instant 9.0% yield for selling the call ($4.86 / $53.74) and a 2.3% gain ($1.26 / $53.74).
After subtracting out the commissions, I’m looking at an 11.2% total return in 59 days.
That works out to a 69.3% annualized yield from NKE.
P.S. The reason I’ve gone public with many of my real-life, real-money “High-Yield Trades” is so you can see for yourself how entirely possible it is to boost your annualized yield on high-quality dividend growth stocks. Just keep in mind that these trades aren’t intended to be specific recommendations for you as an individual. Everyone has different financial situations, risk tolerance, goals, time frames, etc.