Shareholders of W.W. Grainger Inc. (GWW) looking to boost their income beyond the stock's 1.4% annualized dividend yield can sell the January 2014 covered call at the $270 strike and collect the premium based on the $10.60 bid, which annualizes to an additional 12.5% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 13.9% annualized rate in the scenario where the stock is not called away. Any upside above $270 would be lost if the stock rises there and is called away, but GWW shares would have to climb 0.9% from current levels for that to occur, meaning that in the scenario where the stock is called, the shareholder has earned a 4.9% return from this trading level, in addition to any dividends collected before the stock was called.
How To YieldBoost W.W. Grainger To 13.9%
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