YieldBoost Corning To 5.1% Using Options

Shareholders of Corning, Inc. ( GLW) looking to boost their income beyond the stock's 1.9% annualized dividend yield can sell the January 2016 covered call at the $25 strike and collect the premium based on the $1.19 bid, which annualizes to an additional 3.2% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 5.1% annualized rate in the scenario where the stock is not called away. Any upside above $25 would be lost if the stock rises there and is called away, but GLW shares would have to climb 18.2% from current levels for that to happen, meaning that in the scenario where the stock is called, the shareholder has earned a 23.8% return from this trading level, in addition to any dividends collected before the stock was called.

START SLIDESHOW:
Top YieldBoost Calls of the S&P 500 »

In general, dividend amounts are not always predictable and tend to follow the ups and downs of profitability at each company. In the case of Corning, Inc., looking at the dividend history chart for GLW below can help in judging whether the most recent dividend is likely to continue, and in turn whether it is a reasonable expectation to expect a 1.9% annualized dividend yield.

GLW+Dividend+History+Chart

Below is a chart showing GLW's trailing twelve month trading history, with the $25 strike highlighted in red:

Loading+chart++2014+TickerTech.com

The chart above, and the stock's historical volatility, can be a helpful guide in combination with fundamental analysis to judge whether selling the January 2016 covered call at the $25 strike gives good reward for the risk of having given away the upside beyond $25. ( Do most options expire worthless? This and six other common options myths debunked). We calculate the trailing twelve month volatility for Corning, Inc. (considering the last 252 trading day closing values as well as today's price of $21.32) to be 26%. For other call options contract ideas at the various different available expirations, visit the GLW Stock Options page of StockOptionsChannel.com.

In mid-afternoon trading on Thursday, the put volume among S&P 500 components was 903,117 contracts, with call volume at 1.74M, for a put:call ratio of 0.52 so far for the day. Compared to the long-term median put:call ratio of .65, that represents very high call volume relative to puts; in other words, buyers are preferring calls in options trading so far today. Find out which 15 call and put options traders are talking about today.

If you liked this article you might like

These Stocks Are Getting Roughed Up in Tuesday's Market Selloff

These Stocks Are Getting Roughed Up in Tuesday's Market Selloff

Dow Braces for Second Triple-Digit Decline as Global Stocks Retreat

Dow Braces for Second Triple-Digit Decline as Global Stocks Retreat

Stocks Need to Move Lower to Be Able to Move Higher Again: Market Recon

Stocks Need to Move Lower to Be Able to Move Higher Again: Market Recon

What a Nationalized 5G Plan Would Mean for Google, Comcast, Verizon and Others

What a Nationalized 5G Plan Would Mean for Google, Comcast, Verizon and Others