YieldBoost Universal Display From 1.1% To 14.9% Using Options

The article highlights options market dynamics, using Universal Display Corp (OLED) as a case study for covered call strategies, noting its 53% trailing volatility and current price of $156.25 relative to a $180 strike. More broadly, it reports significant activity in S&P 500 options, where call volume of 1.76 million contracts substantially exceeded put volume of 853,328 contracts, yielding a put:call ratio of 0.48. This ratio is notably below the long-term median of 0.65, indicating a strong preference for call options among buyers and suggesting a prevailing bullish sentiment or specific market positioning.

Analysis

A significant bullish sentiment is evident in the broader market's options activity, as indicated by the S&P 500 put-to-call ratio of 0.48, which is substantially below the long-term median of 0.65. This suggests unusually high demand for call options relative to puts. Universal Display Corp (OLED) is highlighted as a specific case where these market dynamics can be applied. The stock's high trailing twelve-month volatility of 53% makes it a candidate for income-generating options strategies. Specifically, the article examines the viability of selling a December covered call with a $180 strike price while the stock trades at $156.25. This strategy allows investors to collect premium, enhanced by the high volatility, while also considering the company's 1.1% annualized dividend yield. However, it requires investors to weigh the income generated against the risk of forfeiting capital appreciation beyond the $180 strike price.

Key Decisions for Investors

• Investors should note the prevailing bullish sentiment indicated by the S&P 500's low put-to-call ratio of 0.48, which could signal near-term market strength or elevated speculative activity.
• For current holders of Universal Display Corp (OLED), its high 53% volatility presents an opportunity to generate additional income by selling covered calls, though this strategy caps upside potential above the selected strike price.
• Potential investors in OLED should evaluate the total return profile, which includes a 1.1% dividend yield and the possibility of option premium income, against the stock's significant price volatility and the inherent risks of such a high-beta name.