Shareholders of Stage Stores Inc. (SSI) looking to boost their income beyond the stock's 2.4% annualized dividend yield can sell the July 2014 covered call at the $25 strike and collect the premium based on the 75 cents bid, which annualizes to an additional 5.4% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 7.8% 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 SSI shares would have to advance 18.7% from current levels for that to happen, meaning that in the scenario where the stock is called, the shareholder has earned a 22.3% return from this trading level, in addition to any dividends collected before the stock was called.
Strategy To YieldBoost Stage Stores From 2.4% To 7.8% Using Options
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