A Covered Call On This REIT Could Generate Some Option Premiums

Core Viewpoint - CareTrust REIT (CTRE) is a strong performer in the REIT sector, offering a 4% annual dividend yield and a 25% increase in stock price this year, making it attractive for income investors [1][5] Summary by Sections Investment Strategy - A covered call strategy can be employed to enhance income from CareTrust REIT while slightly reducing risk on a long stock position, though it limits upside potential above the strike price [2] - Buying 100 shares of CareTrust would cost approximately $3,430, and a Jan. 16, 35-strike call option is trading around $1.25, generating $125 in premium per contract, equating to a 3.8% income in under four months, or 11.9% annualized [3] Profit Potential - If CareTrust stock closes above $35 at expiration, the total profit would be $195, resulting in a 5.9% return or 18.6% annualized [3] Risk Factors - The stock may drop, potentially negating gains from selling the call, and earnings are due to be reported in late November, introducing earnings risk [4] - CareTrust's implied volatility is currently at 22.15%, with a 12-month low of 13.25% and a high of 72.44% [4] Performance Ratings - Investor's Business Daily rates CareTrust with a Composite Rating of 91, an Earnings Per Share Rating of 92, and a Relative Strength Rating of 71, ranking first in its group [5]