Shareholders of La-Z-Boy Inc. (LZB) looking to boost their income beyond the stock's 1.2% annualized dividend yield can sell the July covered call at the $30 strike and collect the premium based on the 70 cents bid, which annualizes to an additional 9.9% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 11.1% annualized rate in the scenario where the stock is not called away. Any upside above $30 would be lost if the stock rises there and is called away, but LZB shares would have to climb 8.5% from current levels for that to occur, meaning that in the scenario where the stock is called, the shareholder has earned a 11% 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 La-Z-Boy Inc., looking at the dividend history chart for LZB 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 1.2% annualized dividend yield. Below is a chart showing LZB's trailing twelve month trading history, with the $30 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 July covered call at the $30 strike gives good reward for the risk of having given away the upside beyond $30. ( Do most options expire worthless? This and six other common options myths debunked). We calculate the trailing twelve month volatility for La-Z-Boy Inc. (considering the last 251 trading day closing values as well as today's price of $27.68) to be 30%. For other call options contract ideas at the various different available expirations, visit the LZB Stock Options page of StockOptionsChannel.com. In mid-afternoon trading on Wednesday, the put volume among S&P 500 components was 544,207 contracts, with call volume at 999,252, for a put:call ratio of 0.54 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.
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
Short-Term Versus Long-Term Investing: Which Is the Better Investment?
Should investors consider short-term or long-term investing when they compile their portfolio? Here's what Carol Schleif, deputy chief investment officer at Abbot Downing.
HP Inc. Shares Rise After Company Beats on Earnings and Revenue
The company also slightly raised its earnings per share guidance for the year.
Jim Cramer Explains What a Trade War With China Means for Tesla
Tesla stock continues to tumble. Jim Cramer opines if ongoing trade tensions with China are to blame.