Shareholders of Interdigital (IDCC) looking to boost their income beyond the stock's 1.1% annualized dividend yield can sell the January 2015 covered call at the $48.50 strike and collect the premium based on the $2.60 bid, which annualizes to an additional 5.4% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 6.5% annualized rate in the scenario where the stock is not called away. Any upside above $48.50 would be lost if the stock rises there and is called away, but IDCC shares would have to advance 30.1% from current levels for that to occur, meaning that in the scenario where the stock is called, the shareholder has earned a 37.1% return from this trading level, in addition to any dividends collected before the stock was called.
YieldBoost Interdigital From 1.1% To 6.5%
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