Shareholders of Shoe Station Group Inc (SHOE) have an options-based opportunity to significantly boost their income beyond the stock’s existing dividend yield.
The company currently offers a 5% annualized dividend yield, but a covered call strategy could push total annualized returns to 24.2% under the right conditions.
Investors can sell the December covered call at the $17.50 strike and collect a premium based on the 75 cents bid, which annualizes to an additional 19.2% rate of return against the current stock price.
Stock Options Channel refers to this premium-enhanced return strategy as the YieldBoost, combining dividend income with options premium collection.
The combined 24.2% annualized rate applies in the scenario where the stock is not called away before expiration, allowing shareholders to pocket both income streams.
Any upside above $17.50 would be lost if the stock rises to that level and is called away by the options counterparty.
SHOE shares would have to climb 29.1% from current levels for the stock to be called away at the $17.50 strike price.
In the scenario where the stock is called away, the shareholder would earn a 34.7% return from this trading level, in addition to any dividends collected before the call was exercised.
The current stock price for SHOE is listed at $13.60, which forms the basis for all yield and return calculations outlined in this strategy.
Trailing twelve month volatility for Shoe Station Group Inc has been calculated at 46%, based on the last 252 trading day closing values along with the current price.
Higher volatility generally translates to richer options premiums, which is a key factor in why this particular covered call setup generates such a notable yield enhancement.
Dividend amounts are not always predictable and tend to follow the ups and downs of profitability at each company, making historical dividend charts a useful reference point.
Investors should review SHOE’s dividend history to judge whether the most recent dividend is likely to continue and whether the 5% annualized yield is a reasonable ongoing expectation.
In mid-afternoon trading on Friday, put volume among S&P 500 components reached 4.41 million contracts, while call volume came in at 7.61 million, producing a put-to-call ratio of 0.58.
Compared to the long-term median put-to-call ratio of 0.65, that figure reflects high call volume relative to puts, indicating buyers currently favor calls in options trading.
