Shareholders of Tal International Group (TAL) looking to boost their income beyond the stock's 5% annualized dividend yield can sell the February 2014 covered call at the $57.50 strike and collect the premium based on the $1.90 bid, which annualizes to an additional 21.6% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 26.6% annualized rate in the scenario where the stock is not called away. Any upside above $57.50 would be lost if the stock rises there and is called away, but TAL shares would have to climb 2.2% from current levels for that to happen, meaning that in the scenario where the stock is called, the shareholder has earned a 5.6% return from this trading level, in addition to any dividends collected before the stock was called.
Strategy To YieldBoost Tal International Group From 5% To 26.6% Using Options
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