Shareholders of Schnitzer Steel Industries, Inc. (SCHN) looking to boost their income beyond the stock's 2.5% annualized dividend yield can sell the May 2014 covered call at the $33 strike and collect the premium based on the $1.30 bid, which annualizes to an additional 7.7% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 10.2% annualized rate in the scenario where the stock is not called away. Any upside above $33 would be lost if the stock rises there and is called away, but SCHN shares would have to advance 9.6% from current levels for that to happen, meaning that in the scenario where the stock is called, the shareholder has earned a 14% return from this trading level, in addition to any dividends collected before the stock was called.
Strategy To YieldBoost Schnitzer Steel Industries To 10.2% Using Options
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