Shareholders of American Railcar Industries Inc (ARII) looking to boost their income beyond the stock's 2.9% annualized dividend yield can sell the December covered call at the $40 strike and collect the premium based on the $2.00 bid, which annualizes to an additional 10.3% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 13.2% annualized rate in the scenario where the stock is not called away. Any upside above $40 would be lost if the stock rises there and is called away, but ARII shares would have to advance 15.8% from current levels for that to happen, meaning that in the scenario where the stock is called, the shareholder has earned a 21.6% return from this trading level, in addition to any dividends collected before the stock was called.
YieldBoost ARII To 13.2%
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