Buckle Buy Write Brings Quick Dividend, Speedy Expiration, 288% Annualized Return Potential

Shares of mall retail chain Buckle

BKE
(BKE) trade ex-dividend tomorrow for a $0.35 per share payout. Own the stock through the close of trading today (Wednesday), and the dividend is yours.

A buy write with options that expire in nine days offers potential for an attractive return with a quick engagement.

Buckle (BKE) – Buy Write

Buy 100 BKE

Sell to Open 1 October 21 $35.00 Call

Execute for Net Debit of $33.25 or lower

Kearney, Neb.-based Buckle (BKE) sells clothing, footwear, and accessories through a network of 451 stores in 42 states. This year, the retailer is expected to grow revenue 4% to $1.35 billion, and earnings are seen lower by 1.4% to $5.09 per share. At 6.7 times forward earnings, BKE trades at a 13% discount to its five-year average P/E of 7.7.

Buckle’s next earning report is due November 18, and there is a $0.35 per share payout to be earned if you own BKE through today’s close before the ex-dividend date on Thursday.

Here is the buy write: Buy 100 shares of BKE, and sell to open one contract of $35.00 October 21 calls for a net debit of $33.25 or lower.

This buy write provides a quick decision. If you earn the dividend on Thursday and if BKE closes above $35.00 on October 21, your shares would be sold and you’d earn $2.10 per share on $33.25 per share at risk, or 6.3%. Over an 8-day holding period, that would be an annualized return of 288%. If the stock closes at or below $35.00 at expiration, you’ll still own it at a cost basis of $32.90 per share, reflecting the dividend earned on Thursday and the premium earned today.

Options income for this trade: You earn $45 selling 1 BKE $35 October 21 call contract. Click here for updated bid-ask and return characteristics.

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