AAON

How To YieldBoost AAON From 0.4% To 9.8% Using Options

Shareholders of AAON, Inc. (Symbol: AAON) looking to boost their income beyond the stock's 0.4% annualized dividend yield can sell the July covered call at the $125 strike and collect the premium based on the $3.80 bid, which annualizes to an additional 9.3% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 9.8% annualized rate in the scenario where the stock is not called away. Any upside above $125 would be lost if the stock rises there and is called away, but AAON shares would have to climb 35.9% from current levels for that to occur, meaning that in the scenario where the stock is called, the shareholder has earned a 40% 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 AAON, Inc., looking at the dividend history chart for AAON 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 0.4% annualized dividend yield.

AAON+Dividend+History+Chart

Below is a chart showing AAON's trailing twelve month trading history, with the $125 strike highlighted in red:

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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 $125 strike gives good reward for the risk of having given away the upside beyond $125. (Do most options expire worthless? This and six other common options myths debunked). We calculate the trailing twelve month volatility for AAON, Inc. (considering the last 251 trading day closing values as well as today's price of $90.64) to be 60%. For other call options contract ideas at the various different available expirations, visit the AAON Stock Options page of StockOptionsChannel.com.

Top YieldBoost Calls of the S&P 500 »

Also see:
• Top Stocks Held By Joel Greenblatt
• Institutional Holders of CVTI
• BDX Price Target

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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