Shareholders of Douglas Dynamics, Inc. (PLOW) looking to boost their income beyond the stock's 5.7% annualized dividend yield can sell the September covered call at the $15 strike and collect the premium based on the 30 cents bid, which annualizes to an additional 14.8% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 20.5% annualized rate in the scenario where the stock is not called away. Any upside above $15 would be lost if the stock rises there and is called away, but PLOW shares would have to advance 3.2% from current levels for that to occur, meaning that in the scenario where the stock is called, the shareholder has earned a 5.3% return from this trading level, in addition to any dividends collected before the stock was called.
Strategy To YieldBoost Douglas Dynamics To 20.5%
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