With shares trading well above my purchase price of $62.01, Monday seemed like a good time to make a new high-yield trade with Papa John’s (PZZA).
For this new trade, I sold one April 17 $65 call option for $4.30 per share.
I sold this call on the 100 shares I originally purchased at $62.01 per share during a high-yield trade I made back in January 2018.
And with PZZA still trading well above my purchase price of $62.01, it seems like a great time to sell another call option and generate additional income.
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: PZZA stays under $65 by April 17
If PZZA stays under $65 by April 17, I’ll get to keep my 100 shares.
In the process, I’ll also have received $430 in call income ($4.30 x 100 shares).
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 6.9% yield for selling the call ($4.30 / $62.01).
In the end, I’m looking at a 6.9% yield in 96 days… which works out to a 26.4% annualized yield.
Scenario #2: PZZA climbs over $65 by April 17
If PZZA climbs over $65 by April 17, my 100 shares will get sold (“called away”) at $65 per share.
In “Scenario 2″ — like “Scenario 1″ — I get to keep the $430 in call income ($4.30 x 100 shares). I’ll also generate a $299 gain ($2.99 x 100) because I bought at $62.01 and will be selling at $65.00.
In this scenario, I’ll be looking at a $729.00 profit.
From a percentage standpoint, this high-yield trade will deliver an instant 6.9% yield for selling the call ($4.30/ $62.01) and a 4.8% capital gain ($2.99 / $62.01).
At the end of the day, I’m looking at a 11.8% total return in 96 days.
That works out to a 44.7% annualized yield from UPS.
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.