Shareholders of Mondelez International Inc (MDLZ) looking to boost their income beyond the stock's 1.7% annualized dividend yield can sell the January 2015 covered call at the $40 strike and collect the premium based on the 69 cents bid, which annualizes to an additional 1.6% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 3.4% 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 MDLZ shares would have to advance 23.7% from current levels for that to happen, meaning that in the scenario where the stock is called, the shareholder has earned a 25.8% return from this trading level, in addition to any dividends collected before the stock was called.
Strategy To YieldBoost Mondelez International From 1.7% To 3.4%
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