Shareholders of Limoneira Co. (LMNR) looking to boost their income beyond the stock's 0.6% annualized dividend yield can sell the March 2014 covered call at the $25 strike and collect the premium based on the $1.05 bid, which annualizes to an additional 13% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 13.7% annualized rate in the scenario where the stock is not called away. Any upside above $25 would be lost if the stock rises there and is called away, but LMNR shares would have to climb 4.6% from current levels for that to occur, meaning that in the scenario where the stock is called, the shareholder has earned a 9% return from this trading level, in addition to any dividends collected before the stock was called.
Strategy To YieldBoost LMNR From 0.6% To 13.7% Using Options
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