Shareholders of Tredegar Corp. (TG - Get Report) looking to boost their income beyond the stock's 1.6% annualized dividend yield can sell the June covered call at the $25 strike and collect the premium based on the 80 cents bid, which annualizes to an additional 8.5% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 10.2% 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 TG shares would have to advance 14.2% from current levels for that to occur, meaning that in the scenario where the stock is called, the shareholder has earned a 17.9% return from this trading level, in addition to any dividends collected before the stock was called.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 Tredegar Corp., looking at the dividend history chart for TG 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 1.6% annualized dividend yield. Below is a chart showing TG's trailing twelve month trading history, with the $25 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 June 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 Tredegar Corp. (considering the last 252 trading day closing values as well as today's price of $21.86) to be 32%. For other call options contract ideas at the various different available expirations, visit the TG Stock Options page of StockOptionsChannel.com.
TheStreet’s Fundamentals of Investing Course will teach you the keys to making the right decisions in any market.
TheStreet’s Personal Finance Essentials Course will teach you money management basics and investing strategies to help you avoid major financial pitfalls.
TheStreet Courses offers dedicated classes designed to improve your investing skills, stock market knowledge and money management capabilities.
More from Stocks
Elon Musk Promises 'Over a Million' Tesla Robotaxis by the End of 2020
The Tesla CEO told investors that Tesla would have a fleet of autonomous robotaxis by the end of next year.
Whirlpool Stock Gains as Appliance Giant Beats Earnings Estimates
Whirlpool shares rose by more than 7% in late trading Monday after the appliance giant announced first-quarter earnings of $3.11 per share.
Elon Musk: All Tesla Cars Produced Now Are Capable of Full Self-Driving
Tesla's CEO and other executives described the EV maker's progress with self-driving technology at the company's Investor Day.