Shareholders of Nexstar Broadcasting Group (NXST) looking to boost their income beyond the stock's 0.9% annualized dividend yield can sell the August 2014 covered call at the $65 strike and collect the premium based on the $2.90 bid, which annualizes to an additional 8.2% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 9.1% annualized rate in the scenario where the stock is not called away. Any upside above $65 would be lost if the stock rises there and is called away, but NXST shares would have to advance 17.3% from current levels for that to happen, meaning that in the scenario where the stock is called, the shareholder has earned a 22.5% return from this trading level, in addition to any dividends collected before the stock was called.
Strategy To YieldBoost Nexstar Broadcasting Group To 9.1% Using Options
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