Jacobs Solutions (J): How to Set Up a Long-Term Covered Call to Boost Yield and Manage Risk

In a low-dividend environment, income-focused investors are increasingly turning to options strategies to enhance returns while preserving capital. One such approach is the covered call, a time-tested method that generates premium income and provides downside protection. Jacobs Solutions (J), a mid-cap industrial services company with strong growth fundamentals and a history of consistent earnings, offers an attractive canvas for this strategy. Below, we break down how to position a long-term covered call on J, leveraging its volatility profile, analyst optimism, and extended options chain.

Why Jacobs Solutions? A Strong Foundation for Options Play

Jacobs Solutions (J) has demonstrated resilience in 2025, with a stock price of $137.19 as of July 19, 2025. Over the past year, the stock has gained 11.25%, outperforming the S&P 500's 15.1% return. Analysts project a $151.38 average price target for the next 12 months, implying a 10.27% upside. This optimism is underpinned by the company's diversified infrastructure contracts, including a recent $2B light rail extension in Seattle and program management roles in India's industrial corridor projects.

While J's beta of 0.90 suggests slightly lower volatility than the broader market, its historical 52-week range ($105.18–$149.05) highlights the potential for price swings. For income-seekers, this volatility isn't a drawback—it's an opportunity. By selling call options against a long position in J, investors can capitalize on market expectations of moderate upside while capping their profit potential.

The Long-Term Covered Call Framework

A covered call involves owning the underlying stock and selling call options against it. For long-term strategies, LEAPS (Long-Term Equity Anticipation Securities) are ideal. These options, with expirations up to three years, allow investors to lock in premium income over extended periods while retaining exposure to the stock's growth potential.

Step 1: Selecting the Right Strike and Expiration

As of July 2025, J's options chain includes expirations into 2026, such as January 2026 and February 2026. For a covered call, choose a strike price above the current stock price to collect premium while allowing room for appreciation. For example:
- Stock Position: Buy 100 shares of J at $137.19.
- Call Option: Sell the January 2026 $145 call for a premium of $3.30 (based on implied volatility of 33.06%).

This setup generates $330 in premium (before transaction costs) and creates a breakeven price of $133.89 (stock price minus premium). If J remains below $145 by expiration, the investor keeps the shares and the premium. If the stock rises above $145, the shares are sold at the strike price, capping gains but ensuring downside protection.

Step 2: Balancing Risk and Reward

The key to a successful covered call is aligning the strike price with the investor's risk tolerance and time horizon. A slightly out-of-the-money (OTM) strike (e.g., $145) offers a higher premium than an at-the-money (ATM) strike but increases the probability of assignment. Conversely, a deeper OTM strike (e.g., $150) reduces premium income but lowers the chance of assignment.

For J, the delta (probability of expiring in the money) for the $145 call is approximately 0.35, meaning there's a 35% chance the option will be exercised. This provides a reasonable balance between income and retention of the stock.

Capitalizing on Implied Volatility and Analyst Consensus

The options market has priced in moderate volatility for J, with 30-day implied volatility at 25.31% as of July 18. While this is lower than historical peaks, it reflects the market's expectation of stable earnings and project-driven growth. Analysts' bullish outlook—9 out of 20 ratings are “Buy”—further supports the case for long-term covered calls.

For instance, UBS's Steven Fisher projects a 19% upside to $155, while Keybanc's Sangita Jain upgraded J to “Buy” with a $155 target. These forecasts suggest that J's price trajectory is likely to remain upward-biased, making the premium from covered calls a valuable income stream.

Risk Management and Rolling Strategies

While covered calls reduce risk, they are not risk-free. If J's price surges above the strike price, the investor forfeits gains beyond the strike. To mitigate this, consider rolling the call option to a higher strike or later expiration. For example, if J reaches $145 in January 2026, the investor could:
1. Buy back the $145 call to close the position.
2. Sell a new call with a higher strike (e.g., $160) or a later expiration (e.g., February 2026).

This tactic extends the income-generating timeline and adjusts the profit target dynamically.

Visualizing the Strategy

Final Thoughts: A Strategic Income Play for 2025–2026

Jacobs Solutions' strong fundamentals, coupled with its favorable volatility profile and extended options chain, make it an ideal candidate for long-term covered calls. By selling LEAPS such as the $145 January 2026 call, investors can generate immediate income while participating in the stock's growth potential. Given the company's projected revenue growth (5.83% in 2025) and analyst optimism, this strategy offers a compelling way to boost yield and manage risk in a low-dividend environment.

For those willing to commit to a multi-month horizon, the key is to monitor J's earnings reports, project wins, and broader market conditions. With disciplined adjustments and a focus on strike selection, a long-term covered call on J can transform a passive holding into an active income generator.

Investment Advice: Open a position in J and sell the $145 January 2026 call to capture premium income. Reassess the strategy in late 2025 based on earnings results and market conditions.