Shareholders of Perrigo Company (PRGO) looking to boost their income beyond the stock's 0.3% annualized dividend yield can sell the May 2014 covered call at the $130 strike and collect the premium based on the $6.60 bid, which annualizes to an additional 8.2% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 8.5% annualized rate in the scenario where the stock is not called away. Any upside above $130 would be lost if the stock rises there and is called away, but PRGO shares would have to advance 4% from current levels for that to happen, meaning that in the scenario where the stock is called, the shareholder has earned a 9.3% return from this trading level, in addition to any dividends collected before the stock was called.
How To YieldBoost PRGO From 0.3% To 8.5%
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