Shareholders of TD Ameritrade Holding Corp (AMTD) looking to boost their income beyond the stock's 1.4% annualized dividend yield can sell the January 2016 covered call at the $40 strike and collect the premium based on the $1.85 bid, which annualizes to an additional 3% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 4.5% annualized rate in the scenario where the stock is not called away. Any upside above $40 would be lost if the stock rises there and is called away, but AMTD shares would have to advance 18% from current levels for that to happen, meaning that in the scenario where the stock is called, the shareholder has earned a 23.4% return from this trading level, in addition to any dividends collected before the stock was called.
Strategy To YieldBoost TD Ameritrade To 4.5% Using Options
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