Shareholders of Waddell & Reed Financial, Inc. (WDR) looking to boost their income beyond the stock's 2% annualized dividend yield can sell the September covered call at the $75 strike and collect the premium based on the $2.85 bid, which annualizes to an additional 9.1% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 11.1% annualized rate in the scenario where the stock is not called away. Any upside above $75 would be lost if the stock rises there and is called away, but WDR shares would have to advance 7% from current levels for that to happen, meaning that in the scenario where the stock is called, the shareholder has earned a 11.1% return from this trading level, in addition to any dividends collected before the stock was called.
YieldBoost Waddell & Reed Financial From 2% To 11.1% Using Options
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