Shareholders of Pier 1 Imports Inc. (PIR) looking to boost their income beyond the stock's 1.2% annualized dividend yield can sell the September covered call at the $22 strike and collect the premium based on the 95 cents bid, which annualizes to an additional 7.5% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 8.7% annualized rate in the scenario where the stock is not called away. Any upside above $22 would be lost if the stock rises there and is called away, but PIR shares would have to advance 12.2% from current levels for that to happen, meaning that in the scenario where the stock is called, the shareholder has earned a 17.1% return from this trading level, in addition to any dividends collected before the stock was called.
How To YieldBoost PIR From 1.2% To 8.7% Using Options
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