Shareholders of Prologis Inc (PLD) looking to boost their income beyond the stock's 3% annualized dividend yield can sell the May 2014 covered call at the $37 strike and collect the premium based on the $1.85 bid, which annualizes to an additional 12.7% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 15.7% annualized rate in the scenario where the stock is not called away. Any upside above $37 would be lost if the stock rises there and is called away, but PLD shares would have to climb 0.2% from current levels for that to occur, meaning that in the scenario where the stock is called, the shareholder has earned a 5.2% return from this trading level, in addition to any dividends collected before the stock was called.
Strategy To YieldBoost Prologis To 15.7% Using Options
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