Since the shares I purchased with my last high-yield trade with Qualcomm (QCOM) just got called away at $67.50, and with the stock hovering around my sale price, it seems like a good time to make a new high-yield trade with the stock.
With this in mind, on Friday I bought 100 shares of QCOM at $68.04 per share and simultaneously sold one July 20, 2018 $70 call option for $3.54 per share.
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 $70 by July 20
If QCOM stays under $70 by July 20 I’ll get to keep my 100 shares.
In the process, I’ll also have received $354 in call income ($3.54 x 100 shares).[hana-code-insert name=’adsense-article’ /]The call income — known as a “premium” in the options world — was collected instantly on Friday.
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 $348.35 in profit after commissions.
On a percentage basis, I received an instant 5.2% yield for selling the call ($3.54 / $68.04).
When I subtract out the commissions I’m looking at a 5.1% yield in 175 days… which works out to a 10.7% annualized yield.
Scenario #2: QCOM climbs over $70 by July 20
If QCOM climbs over $70 by July 20, my 100 shares will get sold (“called away”) at $70 per share.
In “Scenario 2” — like “Scenario 1” — I get to keep the $354 in call income ($3.54 x 100 shares). I’ll also generate $196 in capital gains ($1.96 X 100) because I bought at $68.04 and will be selling at $70.
In this scenario, after commissions I’ll be looking at a $539.40 profit.
From a percentage standpoint, this high-yield trade will deliver an instant 5.2% yield for selling the call ($3.54 / $68.04) and a 2.9% gain ($1.96 / $68.04).
After subtracting out the commissions, I’m looking at a 7.9% total return in 175 days.
That works out to a 16.5% 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’ /]