Shareholders of L-3 Communications Holdings, Inc. (LLL) looking to boost their income beyond the stock's 2% annualized dividend yield can sell the July 2014 covered call at the $115 strike and collect the premium based on the $2.00 bid, which annualizes to an additional 3.3% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 5.4% annualized rate in the scenario where the stock is not called away. Any upside above $115 would be lost if the stock rises there and is called away, but LLL shares would have to climb 7.2% from current levels for that to occur, meaning that in the scenario where the stock is called, the shareholder has earned a 9.1% return from this trading level, in addition to any dividends collected before the stock was called.
How To YieldBoost LLL From 2% To 5.4% Using Options
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