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Garmin's Call Options Strategy Offers Significant Returns

Professional investors might find Garmin Ltd's (GRMN) September covered call at the $200 strike point interesting. With premium collection yielding an annualized rate of 20.1%, investors face a potential upside loss, yet can secure an 11.3% return under certain conditions.

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AI Rating:   7

Impact of Options Strategy on Garmin Ltd. Garmin Ltd's recent analysis focuses on a September covered call option strategy, indicating an opportunity for shareholders to boost their income through call options at a $200 strike price. The projected total annualized return of 20.1% is compelling, especially given the underlying stock price of $193.33.

This strategy gains relevance to investors due to several factors, particularly concerning the company's dividend yield. Currently, GRMN is offering a 1.9% annualized dividend yield, which is subject to variability based on the company's profitability. Investors should closely monitor Garmin's dividend history to assess the sustainability of this yield.

Regarding the covered call, if the stock price exceeds $200, shareholders are positioned to lose any upside beyond this strike price. However, given the necessity of a 3.5% appreciation in stock price, investors could still secure an 11.3% return if conditions are met before the call execution.

Option Market Activity Today, the put-call ratio of .60 indicates a strong tilt toward call options, signaling bullish sentiments among investors, which may positively impact the stock price and enhance investor confidence in the short term. This overall trend in the options market could suggest an expected upside potential for Garmin's stock price.

Volatility Assessment The trailing twelve-month volatility for Garmin is reported at 40%, which could influence the risk appetite of investors considering the covered call strategy. Understanding historical volatility is vital, as it correlates with potential price fluctuations and the likelihood of the stock being called away.

In summary, while options strategies can offer enhanced returns, investors should weigh the risks of potential upside loss with the established dividend yield and current market sentiment.

Stocks:  GRMN