Shareholders of Big 5 Sporting Goods Corp (BGFV) looking to boost their income beyond the stock's 2.5% annualized dividend yield can sell the April 2014 covered call at the $17.50 strike and collect the premium based on the $1.05 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 15% annualized rate in the scenario where the stock is not called away. Any upside above $17.50 would be lost if the stock rises there and is called away, but BGFV shares would have to advance 10.7% from current levels for that to happen, meaning that in the scenario where the stock is called, the shareholder has earned a 17.3% return from this trading level, in addition to any dividends collected before the stock was called.
How To YieldBoost Big 5 Sporting Goods Corp To 15%
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