Turn Omega Healthcare into an Income Machine with This Options Play
With markets becoming more volatile, investors might be more interested in generating income rather than capital gains.
Omega Healthcare (OHI) has long been a staple of dividend investors and with the stock showing a low Beta of 0.54 and a high yield of 5.58%, it provides an attractive opportunity for savvy investors.
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Using options we can more than double the yield on our OHI shares by using a covered call strategy.
A covered call involves selling call options against a stock position.
OHI Covered Call Example
Buying 100 shares of OHI would cost $4,805. The June 18, 2026 call option with a strike price of $50 was trading around $0.90 on Friday, generating $90 in premium per contract for covered call sellers.
Selling the call option generates an income of 1.9% in 96 days, equalling around 7.3% annualized.
Covered call traders also receive the yearly dividend of $2.68 which is a yield of 5.58%.
The covered call option premium brings the total yield up from 5.58% to 12.88%.
That’s a pretty attractive yield for a low-beta, defensive stock and almost double what regular shareholder receive.
That assumes the stock stays exactly where it is. What if the stock rises above the strike price of $50?
If OHI closes above $50 on the expiration date, the shares will be called away at $50, leaving the trader with a total profit of $285 (gain on the shares plus the $90 option premium received). That equates to a 6.0% return, which is 23.0% on an annualized basis.
Of course, the risk with the trade is that the OHI might drop, which could wipe out any gains made from selling the call.
Company Details
Omega Healthcare Investors, Inc. was incorporated in the State of Maryland.
It is a self-administered real estate investment trust (`REIT`), investing in income producing healthcare facilities, principally long-term care facilities located in the United States (`U.S.`) and the United Kingdom (`U.K.`).
The Company provide lease or mortgage financing to qualified operators of skilled nursing facilities (`SNFs`) and, to a lesser extent, assisted living facilities (`ALFs`), independent living facilities and rehabilitation and acute care facilities.
It has historically financed investments through borrowings under its revolving credit facilities, private placements or public offerings of its debt and equity securities, the assumption of secured indebtedness, retention of cash flow, or a combination of these methods.
