Celestica (CLS.TO): Harvesting Yield Through Options in a High-Growth, Non-Dividend Stock

Celestica Inc. (TSX: CLS.TO) has emerged as a standout performer in the technology sector, driven by its strategic pivot toward AI/ML infrastructure, edge computing, and hyperscale data center solutions. With its stock surging 93.6% over the past three months and a five-year return of over 2,100%, Celestica offers investors compelling growth potential. However, its lack of a dividend complicates income-focused strategies—until now. By leveraging options trading, investors can transform this high-momentum stock into a yield-generating machine. Here's how.

Celestica's Momentum: A Catalyst-Driven Rally

Celestica's recent performance is underpinned by two key drivers:
1. Product Innovation: The launch of the DS4100 800G switch (optimized for AI/ML workloads) and the ES1500 edge computing switch has solidified its position as a leader in next-gen data infrastructure. These products align with the soaring demand for AI-driven data centers and IoT systems.
2. Zacks Rank Upgrade: The stock's recent Zacks Rank #2 (“Buy”) reflects analyst optimism, as earnings estimates have been revised upward. This technical and fundamental synergy has fueled a short-term +32.77% monthly gain, pushing the stock to an all-time high of $156.46 in late June 2025.

Why Options Trading? The Case for Synthetic Yield

Celestica's zero dividend yield makes it unattractive for income investors. However, its strong liquidity ($2.8–5.46M shares daily volume), low volatility relative to its growth, and upward momentum create an ideal environment for options-based income strategies. Here's how to structure them:

1. Covered Calls: Capitalizing on Near-Term Optimism

• Strategy: Sell call options at a strike price above the current stock price (e.g., $160 for a stock priced at $156). Collect premiums while betting the stock remains below the strike.
• Why Celestica? Its short-term overbought condition (as noted by Barchart's “Top 1% Buy” rating) suggests limited downside risk, making covered calls low-risk.
• Example: Selling a 3-month $160 call at a $2.50 premium per share generates instant income of $250 per contract, with a breakeven at $158.50.

2. Iron Condors: Profiting from Volatility Constraints

• Strategy: Sell out-of-the-money puts and calls while buying deeper out-of-the-money puts/calls as a hedge. This captures premium income if the stock stays within a range.
• Why Celestica? The stock's low implied volatility (despite high price growth) and analysts' consensus for stable near-term trends make range-bound scenarios likely.
• Example: Sell $150 puts and $170 calls for $1.20 premiums each, while buying $145 puts and $175 calls for $0.50 each. Net credit of $170 per contract locks in income if CLS stays between $150–$170 over 30 days.

Risk Management: Navigating Overbought Conditions

While Celestica's fundamentals are robust, its approach to overbought territory (RSI >70) necessitates caution. Pairing options strategies with stop-losses or trailing stops can mitigate risk. For instance, setting a 10% stop below the entry price ensures capital preservation if the trend reverses.

Conclusion: A High-Yield Opportunity in Disguise

Celestica's 2,144% five-year growth, Zacks upgrades, and AI/edge computing tailwinds position it as a top growth stock. For income investors, options trading offers a path to generate synthetic yield without sacrificing appreciation potential. Strategies like covered calls and iron condors exploit its liquidity and momentum, while disciplined risk management addresses overbought risks.

Investment Recommendation:
- Aggressive Investors: Deploy covered calls with strike prices 3–5% above current levels.
- Conservative Investors: Use iron condors to capitalize on low volatility while capping downside risk.
- Hold Horizon: 1–3 months for maximum premium capture, with a focus on Q3 earnings (expected in late October 2025).

Celestica's stock may not pay dividends, but its trajectory offers creative investors a chance to “earn while they wait”—a rare opportunity in today's yield-starved markets.

DISCLAIMER: Past performance does not guarantee future results. Options trading involves risk and is suitable only for experienced investors.