YieldBoost Bank OZK From 3.5% To 75.7% Using Options

Shareholders of Bank OZK (Symbol: OZK) looking to boost their income beyond the stock's 3.5% annualized dividend yield can sell the October covered call at the $57.50 strike and collect the premium based on the 20 cents bid, which annualizes to an additional 72.1% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 75.7% annualized rate in the scenario where the stock is not called away. Any upside above $57.50 would be lost if the stock rises there and is called away, but OZK shares would have to climb 13.6% from current levels for that to occur, meaning that in the scenario where the stock is called, the shareholder has earned a 14% 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 Bank OZK, looking at the dividend history chart for OZK 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 3.5% annualized dividend yield.

Below is a chart showing OZK's trailing twelve month trading history, with the $57.50 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 October covered call at the $57.50 strike gives good reward for the risk of having given away the upside beyond $57.50. (Do most options expire worthless? This and six other common options myths debunked). We calculate the trailing twelve month volatility for Bank OZK (considering the last 250 trading day closing values as well as today's price of $50.76) to be 34%. For other call options contract ideas at the various different available expirations, visit the OZK Stock Options page of StockOptionsChannel.com.

In mid-afternoon trading on Wednesday, the put volume among S&P 500 components was 554,595 contracts, with call volume at 1.65M, for a put:call ratio of 0.34 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.

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

Also see: • Institutional Holders of NEXA
• ESXB Price Target
• Institutional Holders of BNDS


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