YieldBoost Computer Programs & Systems To 9.2% Using Options

Shareholders of Computer Programs & Systems Inc ( CPSI) looking to boost their income beyond the stock's 3.6% annualized dividend yield can sell the March 2015 covered call at the $75 strike and collect the premium based on the $2.15 bid, which annualizes to an additional 5.5% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 9.2% annualized rate in the scenario where the stock is not called away. Any upside above $75 would be lost if the stock rises there and is called away, but CPSI shares would have to climb 19.7% from current levels for that to occur, meaning that in the scenario where the stock is called, the shareholder has earned a 23.2% return from this trading level, in addition to any dividends collected before the stock was called.

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 Computer Programs & Systems Inc, looking at the dividend history chart for CPSI 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 3.6% annualized dividend yield.


Below is a chart showing CPSI's trailing twelve month trading history, with the $75 strike highlighted in red:


The chart above, and the stock's historical volatility, can be a helpful guide in combination with fundamental analysis to judge whether selling the March 2015 covered call at the $75 strike gives good reward for the risk of having given away the upside beyond $75. ( Do most options expire worthless? This and six other common options myths debunked). We calculate the trailing twelve month volatility for Computer Programs & Systems Inc (considering the last 252 trading day closing values as well as today's price of $62.65) to be 32%. For other call options contract ideas at the various different available expirations, visit the CPSI Stock Options page of StockOptionsChannel.com.

In mid-afternoon trading on Wednesday, the put volume among S&P 500 components was 679,222 contracts, with call volume at 1.29M, for a put:call ratio of 0.53 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.

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