With shares trading above my purchase price of $274.02, Friday, June 5, seemed like a good time to make a new high-yield trade with NVIDIA Corporation (NVDA).
For this new trade, I sold one June 18, 2021 $360 option for $63.83. In short, I sold another call option on the 100 shares of NVDA I had originally purchased for $274.02 in a high-yield trade I made back in August 2018.
That original high-yield trade generated $3,466 in cash and the option expired on June 21, 2019.Today, with NVDA trading well above my purchase price of $274.02, it seems like a great time to sell yet another call option and generate additional income on these same 100 shares.
If you followed along with my original trade, consider selling another round of call options here.
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: NVDA stays under $360 by June 18, 2021
If NVDA stays under $360 by June 18, 2021, I’ll get to keep my 100 shares.
In the process, I’ll also have received $6,383 in call income ($6,383 x 100 shares). The call income — known as a “premium” in the options world — was collected Friday.
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 23.3% yield for selling the call ($63.83 / $274.02).
In the end, I’m looking at a 23.3% yield in 378 days… which works out to a 22.5% annualized yield.
Scenario #2: NVDA climbs over $360 by June 18, 2021
If NVDA climbs over $360 by June 18, 2021, my 100 shares will get sold (“called away”) at $360 per share.
In “Scenario 2″ — like “Scenario 1″ — I get to keep the $6,383 in call income ($63.83 x 100 shares). I’ll also generate a $8,598 gain ($85.98 x 100) because I bought at $274.02 and will be selling at $360.00.
In this scenario, I’ll be looking at a $14,981.00 profit.
From a percentage standpoint, this high-yield trade will deliver an instant 23.3% yield for selling the call ($63.83/ $274.02) and a 31.4% capital gain ($85.98 / $274.02).
At the end of the day, I’m looking at a 54.7% total return in 378 days.
That works out to a 52.8% annualized yield from NVDA.
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]