TROW

Strategy To YieldBoost T. Rowe Price Group To 10.1% Using Options

Shareholders of T. Rowe Price Group Inc (Symbol: TROW) looking to boost their income beyond the stock's 4.8% annualized dividend yield can sell the January 2027 covered call at the $115 strike and collect the premium based on the $5.40 bid, which annualizes to an additional 5.2% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 10.1% annualized rate in the scenario where the stock is not called away. Any upside above $115 would be lost if the stock rises there and is called away, but TROW shares would have to climb 9.5% from current levels for that to happen, meaning that in the scenario where the stock is called, the shareholder has earned a 14.6% 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 T. Rowe Price Group Inc, looking at the dividend history chart for TROW 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 4.8% annualized dividend yield.

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Below is a chart showing TROW's trailing twelve month trading history, with the $115 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 January 2027 covered call at the $115 strike gives good reward for the risk of having given away the upside beyond $115. (Do most options expire worthless? This and six other common options myths debunked). We calculate the trailing twelve month volatility for T. Rowe Price Group Inc (considering the last 250 trading day closing values as well as today's price of $104.85) to be 29%. For other call options contract ideas at the various different available expirations, visit the TROW Stock Options page of StockOptionsChannel.com.

In mid-afternoon trading on Tuesday, the put volume among S&P 500 components was 1.15M contracts, with call volume at 1.93M, for a put:call ratio of 0.60 so far for the day. Compared to the long-term median put:call ratio of .65, that represents high call volume relative to puts; in other words, buyers are showing a preference for calls in options trading so far today. Find out which 15 call and put options traders are talking about today.

Top YieldBoost Calls of S.A.F.E. Dividend Stocks »

Also see:
• Top Ten Hedge Funds Holding NRP
• SMIN market cap history
• HOV market cap history

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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