With shares trading well above my purchase price of $64.55, Thursday seemed like a good time to make a new high-yield trade with Qualcomm (QCOM).
For this new trade, I sold one June 21, 2019 $80 call option for $3.69 per share.[hana-code-insert name=’adsense-article’ /]I sold this call on the 100 shares I originally purchased at $64.55 per share during a high-yield trade I made back in March 2018.
That previous call option generated $95 in cash when I sold it and the contract expired in March 2018, so I’m still holding the shares and have been collecting dividend income in the process.
Thursday, for my new high-yield trade, I simply sold another call option on those same 100 shares I originally purchased in March 2018.
Every time you’re able to sell an option like this, you generate additional income.
It’s a trade-off… and one I’m willing to make because this strategy, by its very nature — selling a call option instead of buying one — is designed to be conservative and to generate income.
There are likely two ways this new trade will work out — and they both spell double-digit annualized yields.
Scenario #1: QCOM stays under $80 by June 21
If QCOM stays under $80 by June 21, I’ll get to keep my 100 shares.
In the process, I’ll also have received $369 in call income ($3.69 x 100 shares).[hana-code-insert name=’adsense-article’ /]The call income — known as a “premium” in the options world — was collected Thursday.
It was deposited in the account where I made the trade, which is my 401k retirement account.
On a percentage basis, I received an instant 5.7% yield for selling the call ($3.69 / $64.55).
In the end, I’m looking at a 5.7% yield in 64 days… which works out to a 23.9% annualized yield.
Scenario #2: QCOM climbs over $80 by June 21
If QCOM climbs over $80 by June 21, my 100 shares will get sold (“called away”) at $80 per share.
In “Scenario 2″ — like “Scenario 1″ — I get to keep the $369 in call income ($3.69 x 100 shares). I’ll also generate a $1,545 gain ($15.45 X 100) because I bought at $64.55 and will be selling at $80.
In this scenario, I’ll be looking at a $1,914 profit.
From a percentage standpoint, this high-yield trade will deliver an instant 5.7% yield for selling the call ($3.69 / $64.55) and a 23.9% capital gain ($15.45 / $64.55).
At the end of the day, I’m looking at a 29.7% total return in 64 days.
That works out to a 169.2% 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 easy 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.