Writing Calls On This TV Stock Could Produce 82% Annualized Return

This covered call-writing recommendation from Forbes Premium Income Report involves buying the underlying stock and selling $24 call options that expire in 24 days on September 16. This means that if the stock closes above $24 at expiration in a little more than three weeks, the profit on the trade would be 5.4%. On an annualized basis, that would be 82.6%. Included in our return would be a $0.25 per share dividend with an ex-dividend date of August 31. Please see details below.

Please email me (jdobosz@forbes.com) at any time with questions about how to use Forbes Premium Income Report. — J.D.

Sinclair Broadcast Group (SBGI) - Buy Write

Buy 200 SBGI

Sell to Open 2 September 16 $24 Calls

Execute for Net Debit of $23.00 or lower

Hunt Valley, Md.-based Sinclair Broadcast Group (SBGI) is a leading provider of local sports and news via television and online media. It operates 21 regional sports networks covering 42 NBA, MLB, and NHL teams, and owns or provides services to 185 television stations in 86 markets. It owns stations that are affiliated with all the major broadcast networks.

Sinclair is currently in the Forbes Dividend Investor portfolio.

Dividends sweeten the attractiveness of Sinclair. The stock yields 4.2% and there is an upcoming ex-dividend date on August 31 for a $0.25 per share payment.

Here is the buy write: Buy 200 SBGI ($23.65 current price), and sell to open 2 contracts of SBGI's $24 September 16 calls. On a buy write order ticket, use a net debit of $23.00 or lower.

If we earn the dividend next week, and if SBGI closes above $24 on September 16, we will be obliged to sell our shares at $24, earning $1.25 per share on $23.00 per share at risk, or 5.43%. Over a 24-day holding period, the annualized return would be 82.6%. If SBGI closes at or below $24 at expiration, we will still own the stock at a $22.75 per share cost basis, reflecting the dividend next week and the options premium earned today for selling the calls.

There is the possibility that we could be assigned just before the ex-dividend date. That would mean that we don’t earn the dividend, but that would not be a horrible outcome as we would be earning 4.35% ($1.00/$23.00) for just one week of risk.

Options income for this trade: We earn $130 selling 2 SBGI September 16 $24 call contracts. Click here for updated bid-ask and return characteristics.

NOTE: Forbes Premium Income Report is intended to provide information to interested parties. As we have no knowledge of individual circumstances, goals and/or portfolio concentration or diversification, readers are expected to complete their own due diligence before purchasing any assets or securities mentioned or recommended. We do not guarantee that investments mentioned in this newsletter will produce profits or that they will equal past performance. Although all content is derived from data believed to be reliable, accuracy cannot be guaranteed. John Dobosz and members of the staff of Forbes Premium Income Report may hold positions in some or all the assets/securities listed. Copyright 2022 by Forbes Media LLC.