Shareholders of Cabot Corp. (CBT) looking to boost their income beyond the stock's 1.4% annualized dividend yield can sell the October covered call at the $65 strike and collect the premium based on the $2.10 bid, which annualizes to an additional 6.5% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 7.8% annualized rate in the scenario where the stock is not called away. Any upside above $65 would be lost if the stock rises there and is called away, but CBT shares would have to advance 8.3% from current levels for that to occur, meaning that in the scenario where the stock is called, the shareholder has earned a 11.8% return from this trading level, in addition to any dividends collected before the stock was called.
YieldBoost CBT To 7.8% Using Options
Check Out Our Best Services for Investors
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Model portfolio
- Stocks trading below $10
- Intraday trade alerts
More than 30 investing pros with skin in the game give you actionable insight and investment ideas.