Shareholders of Valspar Corp. (VAL) looking to boost their income beyond the stock's 1.5% annualized dividend yield can sell the April 2014 covered call at the $75 strike and collect the premium based on the $2.05 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 9.4% annualized rate in the scenario where the stock is not called away. Any upside above $75 would be lost if the stock rises there and is called away, but VAL shares would have to climb 6.4% from current levels for that to occur, meaning that in the scenario where the stock is called, the shareholder has earned a 9.3% return from this trading level, in addition to any dividends collected before the stock was called.
Strategy To YieldBoost Valspar From 1.5% To 9.4% Using Options
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