Shareholders of Medallion Financial Corp. (TAXI) looking to boost their income beyond the stock's 6.4% annualized dividend yield can sell the January 2014 covered call at the $15 strike and collect the premium based on the 10 cents bid, which annualizes to an additional 14.1% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 20.5% annualized rate in the scenario where the stock is not called away. Any upside above $15 would be lost if the stock rises there and is called away, but TAXI shares would have to climb 4.5% 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.
How To YieldBoost Medallion Financial From 6.4% To 20.5% Using Options
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