Shareholders of Roundy's Inc (RNDY) looking to boost their income beyond the stock's 5.2% annualized dividend yield can sell the March 2014 covered call at the $10 strike and collect the premium based on the 45 cents bid, which annualizes to an additional 11.4% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 16.6% annualized rate in the scenario where the stock is not called away. Any upside above $10 would be lost if the stock rises there and is called away, but RNDY shares would have to advance 8.1% from current levels for that to happen, meaning that in the scenario where the stock is called, the shareholder has earned a 13% return from this trading level, in addition to any dividends collected before the stock was called.
How To YieldBoost Roundy's From 5.2% To 16.6% Using Options
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