Exxon Mobil: Enhance The Yield By 30% On One Of The S&P 500's Highest Yielding Stocks | IBD | Summary and Q&A

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August 10, 2022
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Investor's Business Daily
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Exxon Mobil: Enhance The Yield By 30% On One Of The S&P 500's Highest Yielding Stocks | IBD

TL;DR

Utilize a covered call strategy to generate income and define an exit price for Exxon Mobil stock.

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Questions & Answers

Q: What is a covered call strategy?

A covered call strategy involves buying shares of a stock and selling call options against it to collect income while defining an exit price.

Q: How does a covered call enhance the yield of a stock?

By selling call options, investors generate premium income, which offsets the cost basis of the stock and increases its annualized yield.

Q: What are the risks of a covered call strategy?

The main risk is if the stock price declines, in which case the investor may need to sell the stock at a loss. Additionally, there is a risk of the stock being called away if it trades above the strike price at expiration.

Q: How can investors choose the right options for a covered call strategy?

Investors can analyze expiration dates and strike prices based on their portfolio needs and market expectations.

Summary & Key Takeaways

  • Exxon Mobil stock is currently one of the top yielding S&P 500 stocks, outperforming the index this year.

  • A covered call strategy allows investors to collect income while defining a predetermined exit price for the stock.

  • By selling call options on the stock, investors can offset the cost basis of their long position and enhance the yield of the stock.

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