With shares trading above my purchase price of $46.70, it seemed like a good time to make a new high-yield trade with Intel (INTC).
On Monday I sold two January 18, 2019 $47.00 calls for $2.50 per share.
[hana-code-insert name=’adsense-article’ /]I sold these calls on the 200 shares I originally purchased at $46.70 per share during a high-yield trade I made in September.That call options expired on October 26, so my latest trade simply involves selling another round of calls on these same 200 shares.
Every time you’re able to sell an option like this, you generate additional income.
It’s a great way to turn a stock’s “normal” yield (if you rely on dividends alone) into a high-yielder.
There are likely two ways this new trade will work out — and they both spell double-digit annualized yields.
Scenario #1: INTC stays under $47.00 by January 18, 2019
If INTC stays under $47.00 by January 18, I’ll get to keep my 200 shares.
In the process, I’ll also have received $500 in call income ($2.50 x 200 shares).
[hana-code-insert name=’adsense-article’ /]The call income — known as a “premium” in the options world — was collected Monday.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 $493.67 in profit after commissions.
On a percentage basis, I received an instant 5.4% yield for selling the calls ($2.50 / $46.70).
When I subtract out the commissions I’m looking at a 5.3% yield in 74 days… which works out to a 26.1% annualized yield.
Scenario #2: INTC climbs over $47.00 by January 18, 2019
If INTC climbs over $47.00 by January 18, my 200 shares will get sold (“called away”) at $47.00 per share.
In “Scenario 2″ — like “Scenario 1″ — I get to keep the $500 in call income ($2.50 x 200 shares). I’ll also generate $58 in capital gains ($0.29 X 200) because I bought at $46.70 and will be selling at $47.00.
In this scenario, after commissions I’ll be looking at a $546.72 profit.
From a percentage standpoint, this high-yield trade will deliver an instant 5.4% yield for selling the calls ($2.50 / $46.70) and a 0.6% gain ($0.29 / $46.70).
After subtracting out the commissions, I’m looking at a 5.9% total return in 74 days.
That works out to a 28.9% annualized yield from INTC.
Greg Patrick
TradesOfTheDay.com
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.
[stextbox id=”info”]Please keep in mind that these “High-Yield Trade” alerts are for information purposes only. We’re not registered financial advisors and these aren’t specific trade recommendations for you as an individual. Each of our readers have different financial situations, risk tolerance, goals, time frames, etc. The ideas we publish are simply ideas that we feel fit our specific needs and that we’re personally making in our own portfolios. You should also be aware that some of the trade details (specifically stock prices and options premiums) are certain to change from the time we make our trade to the time you’re alerted about it. So please don’t attempt to make this “High-Yield Trade” yourself without first doing your own due diligence and research.[/stextbox] [hana-code-insert name=’MMPress’ /]