Shareholders of SkyWest Inc. (SKYW) looking to boost their income beyond the stock's 1% annualized dividend yield can sell the April 2014 covered call at the $17.50 strike and collect the premium based on the 55 cents bid, which annualizes to an additional 7.9% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 8.9% 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 SKYW shares would have to climb 11.9% from current levels for that to happen, meaning that in the scenario where the stock is called, the shareholder has earned a 15.4% return from this trading level, in addition to any dividends collected before the stock was called.
YieldBoost SkyWest To 8.9% Using Options
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