Shareholders of Globe Specialty Metals Inc (GSM) looking to boost their income beyond the stock's 1.5% annualized dividend yield can sell the June 2014 covered call at the $20 strike and collect the premium based on the 85 cents bid, which annualizes to an additional 7.3% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 8.8% annualized rate in the scenario where the stock is not called away. Any upside above $20 would be lost if the stock rises there and is called away, but GSM shares would have to advance 10.6% from current levels for that to happen, meaning that in the scenario where the stock is called, the shareholder has earned a 15.3% return from this trading level, in addition to any dividends collected before the stock was called.
YieldBoost GSM To 8.8% Using Options
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