Earn 14% On SCCO Stock Now, For Capping Your Upside At 18%

Here is a way to get paid a meaningful income now on Southern Copper shares you already own, income you keep no matter what, in exchange for capping your gains at a higher price.

Southern Copper (SCCO) just put up a monster quarter, riding a historic surge in metal prices to record-breaking financial results. Yet after a spectacular run, the stock now trades about 15% below its 52-week high, leaving investors to wonder if the best gains are in the rearview mirror. For those who own the shares, this sets up an interesting proposition: a trade that pays you a significant cash income today, which is yours to keep regardless of what the stock does next.

14% annualized income on SCCO shares you already own, with 18% upside room, by selling a covered call.

• You own (or buy) 100 shares of SCCO near today's price of $185.91.
• Sell one call option on SCCO expiring 7/16/2027, with a strike price of $220, about 18% above today.
• Collect roughly $2,425 in premium up front per contract (each contract covers 100 shares), which you keep no matter what the stock does.
• That premium is about 13.8% annualized on the $18,591 of stock, income you earn just for holding.
• If SCCO finishes above $220, your shares are called away at $220. Counting the premium, your total return works out to about 33% annualized, but you give up any gains above the strike.

Called Away Or Not, You Pocket The Premium

If SCCO finishes below $220 on 7/16/2027, the call expires worthless, and you keep the full $2,425 premium and all your shares. That is about 13% over 347 days.

If SCCO finishes above $220, your 100 shares are called away at $220. You still keep the $2,425 premium, and counting it your total gain works out to about 31% over the holding period (about 33% annualized), a healthy exit. The cost of the trade is that any gain above $220 is no longer yours. And if the stock instead falls, you keep the premium but still ride the shares down, cushioned only slightly.

So the whole trade comes down to one thing: how much of that upside are you really likely to give up, and would you be content to sell at that higher price?

How Much Upside Would You Really Be Giving Up?

The only real cost is the potential for runaway gains you would forfeit. So, how much blue sky are you really giving up? On one hand, the bull case is roaring. The company is printing cash, with sales rising up to $4.3 billion in the second quarter on the back of a 40% jump in copper prices. That gusher of cash flow funds a massive project pipeline that promises to fuel growth for years, with management sounding newly optimistic about a more favorable political climate in Peru. This is the story that could send the stock well past your exit price.

But there's a catch, and it's a big one. While prices are soaring, the company's actual copper production fell 3.5% last quarter, including a 12% drop in Peru, which management chalked up to "lower ore grades." That operational stumble is compounded by a history of project delays, a fact analysts repeatedly probed on the latest earnings call. If you believe the commodity updraft will eventually lift all boats and the company will finally execute on its long-promised growth, you let the stock run. But if you see a miner struggling with operations even in a perfect price environment, getting paid now to agree to a profitable, pre-defined exit might feel like the smartest move on the board. The thing to watch is progress on the Tia Maria project; any sign that its 42% completion rate is accelerating, or stalling, will tell you a lot about whether that future growth is finally arriving.

Turn A Stock You Own Into Income

You may not own SCCO, but you almost certainly own something that could be paying you. Our Covered Call Finder lets you type in a stock, or a few, and instantly see the income a covered call could generate on each, then dial the strike up or down with a slider to balance more income against more upside. It is the quickest way to see what the names in your own portfolio could pay.

One step out from a single name: a U.S. basic materials ETF like IYM owns the whole U.S. basic materials group at once, so no single company can sink you. It still rises and falls with that one theme, which is exactly the gap the portfolio below closes.

One Name, One Theme, Or The Whole Market

There is a ladder here. A covered call earns income on one company. A sector fund spreads that across one theme. Neither escapes the risk that a single industry hits a rough patch. The next rung is a core built across every sector, so the whole thing never rides on one bet.

The Trefis High Quality (HQ) Portfolio is that rung: about 30 quality businesses across sectors, each weighed on the full sweep of its fundamentals, sized and rebalanced with discipline. It has a track record of outpacing a benchmark that combines the three major indices - the S&P 500, S&P Mid-cap, and Russell 2000. Use the call for income on names you like; let a diversified, cross-sector core carry the long game.