Shareholders of PriceSmart (PSMT) looking to boost their income beyond the stock's 0.5% annualized dividend yield can sell the January 2014 covered call at the $125 strike and collect the premium based on the $3.30 bid, which annualizes to an additional 15.1% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 15.6% annualized rate in the scenario where the stock is not called away. Any upside above $125 would be lost if the stock rises there and is called away, but PSMT shares would have to climb 5% from current levels for that to occur, meaning that in the scenario where the stock is called, the shareholder has earned a 7.7% return from this trading level, in addition to any dividends collected before the stock was called.
YieldBoost PSMT To 15.6% Using Options
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