Shareholders of FirstEnergy Corp. (FE) looking to boost their income beyond the stock's 4.3% annualized dividend yield can sell the January 2016 covered call at the $37 strike and collect the premium based on the $1.00 bid, which annualizes to an additional 1.7% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 6.1% annualized rate in the scenario where the stock is not called away. Any upside above $37 would be lost if the stock rises there and is called away, but FE shares would have to advance 11.1% from current levels for that to happen, meaning that in the scenario where the stock is called, the shareholder has earned a 14.1% return from this trading level, in addition to any dividends collected before the stock was called.
YieldBoost FirstEnergy From 4.3% To 6.1% Using Options
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