Copyright Investor's Business Daily
SoFi Technologies (SOFI) stock continues to show solid price action, holding steady above the 21-day, 50-day and 200-day moving averages, and is also showing signs of strong accumulation. Unfortunately for income investors, SoFi does not pay a dividend. But you can manufacture your own "dividend" using options. A covered call involves buying 100 shares of the underlying stock and simultaneously selling a call option against those shares. Selling the call limits the upside but increases the yield from the investment in the form of option premium. The investor keeps the premium generated from selling calls no matter what happens with the stock. When trading covered calls, most investors sell monthly calls against their stock to make the most of the effects of time decay. That makes a lot of sense but also requires a lot of active management. What happens by selling longer-term covered calls against SoFi stock? Let's take a look. Mechanics Of The Long-Term Covered Call On SoFi stock, a Sept. 18, 2026, call option with a strike price of 35 can currently be sold for around $6.60. That amounts to an impressive $660 in premium per 100-share contract. Purchasing 100 shares of SoFi stock will cost around $3,050, but the net cost can be reduced by the $660 option premium received. Therefore, we have created a yield of $660 over a net cost of $2,390 in 311 days. That amounts to 27.6%, or 32.3% annualized. It clearly beats the dividend yield on most stocks in the current market. Further, it still allows for around $450 of capital appreciation. If SoFi closes above 35 on the expiration date, the shares will be called away at 35. That leaves the trader with a 46.4% return, which is 54.3% on an annualized basis. If SoFi closes below 35 on the expiration date, the investor can sell another call if they want to continue generating option premium. Covered calls are a fantastic way to generate income from a stock holding while also providing some downside protection. But investors would need to weigh the pros and cons of the stock before initiating a bullish trade like a covered call. SoFi Stock: Second In Its Group Investor's Business Daily gives SoFi stock a Composite Rating of 95 out of a best-possible 99, an Earnings Per Share Rating of 80 and a Relative Strength Rating of 95. According to IBD Stock Checkup, SoFi Technologies ranks second in its group. SoFi is a digital financial services company offering a wide range of products including lending, investing, banking, and insurance. Its three main segments of lending, technology platform, and financial services aim to help members achieve financial independence through an integrated, mobile-first experience. Please remember that options are risky, and investors can lose 100% of their investment. This article is for education purposes only and not a trade recommendation. Remember to always do your own due diligence and consult your financial advisor before making any investment decisions. Gavin McMaster has a masters in applied finance and investment. He specializes in income trading using options, and is conservative in his style. He also believes patience in waiting for the best setups is the key to successful trading. Follow him on X/Twitter at @OptiontradinIQ. YOU MIGHT ALSO LIKE: As Merck Stock Gets Back To Its Feet, Here's One Possible Option Trade Here's A Potential Robinhood Stock Trade With Earnings On The Way With Boeing Stock Below Its 50-Day Line, Consider This Option Trade
