Shareholders of Western Union Co. (WU) looking to boost their income beyond the stock's 3% annualized dividend yield can sell the January 2016 covered call at the $20 strike and collect the premium based on the $1.10 bid, which annualizes to an additional 3.1% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 6.1% annualized rate in the scenario where the stock is not called away. Any upside above $20 would be lost if the stock rises there and is called away, but WU shares would have to climb 19.7% from current levels for that to happen, meaning that in the scenario where the stock is called, the shareholder has earned a 26.3% return from this trading level, in addition to any dividends collected before the stock was called.
YieldBoost Western Union To 6.1% Using Options
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