With shares trading above my purchase price of $65.37, yesterday seemed like a perfect time to make a new high-yield trade with Qualcomm (QCOM).
My trade involved selling one January 19, 2018 $67.50 call for $2.35 per share.
I sold this call on the 100 shares I purchased for $65.37 per share during a previous high-yield trade.
The call option I sold on that trade expired worthless back on February 17, so I’ve been holding the shares since then and collecting dividends. But now that the stock is trading back above my purchase price, I’m simply selling another round of calls on those same shares to generate additional income.
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: QCOM stays under $67.50 by January 19
If QCOM stays under $67.50 by January 19 I’ll get to keep my 100 shares.
In the process, I’ll also have received $235 in call income ($2.35 x 100 shares).[hana-code-insert name=’adsense-article’ /]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 $229.40 in profit after commissions.
On a percentage basis, I received an instant 3.6% yield for selling the call ($2.35 / $65.37).
When I subtract out the commissions I’m looking at a 3.5% yield in 66 days… which works out to a 19.4% annualized yield.
Scenario #2: QCOM climbs over $67.50 by January 19
If QCOM climbs over $67.50 by January 19, my 100 shares will get sold (“called away”) at $67.50 per share.
In “Scenario 2″ — like “Scenario 1″ — I get to keep the $235 in call income ($2.35 x 100 shares). I’ll also generate $213 in capital gains ($2.13 X 100) because I bought at $65.37 and will be selling at $67.50.
In this scenario, after commissions I’ll be looking at a $437.45 profit.
From a percentage standpoint, this high-yield trade will deliver an instant 3.6% yield for selling the call ($2.35 / $65.37) and a 3.3% gain ($2.13 / $65.37).
After subtracting out the commissions, I’m looking at a 6.7% total return in 66 days.
That works out to a 37.0% annualized yield from QCOM.
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.[hana-code-insert name=’MMPress’ /]