DigitalBridge Group Options Strategy Offers Potential 25% Return

A recent report highlights an enticing income strategy for DigitalBridge Group Inc (DBRG) shareholders. By utilizing a covered call option, investors can potentially achieve a total annualized return of 25.3%, despite the risks of stock price increases. This strategy invites further scrutiny by investors.

Date: 05-11-2024

AI Rating: 7

The report details a specific investment strategy for shareholders of DigitalBridge Group Inc (DBRG) who are seeking to enhance their income. By selling a covered call option for March 2025 at a $13 strike price, shareholders can collect a premium equivalent to an annualized additional rate of return of 25% based on the current stock price of $12.49.

The projected total return, if the stock does not get called away, amounts to 25.3% annually, which is a significant amount compared to the stock’s annualized dividend yield of 0.3%. In the event that the stock price rises above $13 and the shares are called away, the shareholder stands to gain a 14.5% return from the stock price appreciation, in addition to the dividends acquired beforehand.

However, investors should be wary, as dividend payments can be unpredictable and are often tied to a company's profitability trends. The report hints at analyzing DigitalBridge Group's dividend history to gauge the sustainability of its current 0.3% yield.

The report mentions an important aspect of trading options: volatility. It states that DigitalBridge Group has a trailing twelve-month volatility of 45%, which should be taken into account when deciding the risk-reward balance of selling covered calls.

Additionally, options trading data indicates a higher call volume (1.29 million contracts) than put volume (690,005 contracts), resulting in a put-call ratio of 0.54. This tilt towards calls suggests that market participants may have a bullish outlook on the stock, which could affect future stock price movements.

Stocks: DBRG