With shares trading well above my purchase price of $52.41, yesterday seemed like a good time to make a new high-yield trade with Walgreens Boots Alliance (WBA).
For this new trade, I sold one November 15, 2019 $55 call option for $2.33 per share.
I sold this call on the 100 shares I originally purchased at $52.41 per share during a high-yield trade I made back in April 2019.
[hana-code-insert name=’adsense-article’ /]That original call option generated $246 in cash and expired on July 19.Since that option also went on to expire, I’m still holding the original 100 shares of WBA and have been collecting the stock’s dividends (in addition to the call option).
Monday, for my new high-yield trade, I simply sold another call option on those same 100 shares I originally purchased in April 2019.
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: WBA stays under $55 by November 15
If WBA stays under $55 by November 15, I’ll get to keep my 100 shares.
In the process, I’ll also have received $2.33 in call income ($2.33 x 100 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.
On a percentage basis, I received an instant 4.4% yield for selling the call ($2.33 / $52.41).
In the end, I’m looking at a 4.4% yield in 46 days… which works out to a 35.3% annualized yield.
Scenario #2: WBA climbs over $55 by November 15
If WBA climbs over $55 by November 15, my 100 shares will get sold (“called away”) at $55 per share.
In “Scenario 2″ — like “Scenario 1″ — I get to keep the $233 in call income ($2.33 x 100 shares). I’ll also generate a $259 gain ($2.59 x 100) because I bought at $52.41 and will be selling at $55.
In this scenario, I’ll be looking at a $492.00 profit.
From a percentage standpoint, this high-yield trade will deliver an instant 4.4% yield for selling the call ($2.33/ $52.41) and a 4.9% capital gain ($2.59 / $52.41).
At the end of the day, I’m looking at a 94% total return in 46 days.
That works out to a 74.5% annualized yield from WBA.
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 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.
[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]