An analysis of a covered call strategy on Amdocs Ltd. (DOX) stock, involving the purchase of shares at $89.16 and the sale of a September 19th $90.00 strike call for $1.30, projects a potential 2.40% return if the stock is called away. Alternatively, if the option expires worthless, which has current odds of 50%, the collected premium provides a 1.46% yield boost, annualizing to 8.32%. This strategy offers a defined yield enhancement opportunity on DOX, set against an implied volatility of 24% compared to the stock's 20% trailing twelve-month actual volatility.
The proposed covered call strategy on Amdocs Ltd. (DOX) involves purchasing shares at $89.16 and simultaneously selling the September 19th expiration call option at a $90.00 strike price for a premium of $1.30. This structure presents two primary outcomes. If DOX shares are called away (i.e., close above $90.00 at expiration), the investor realizes a total return of 2.40% before commissions, effectively capping gains. Alternatively, if the option expires worthless, which current data suggests has a 50% probability, the investor retains the shares and the collected premium, generating a 1.46% return boost, or an 8.32% annualized yield. A key factor in this scenario is the volatility spread; the option's implied volatility stands at 24%, which is elevated compared to the stock's trailing twelve-month actual volatility of 20%. This suggests the option is relatively richly priced compared to the stock's recent price behavior, enhancing the appeal of selling the contract to capture this premium.
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