Shareholders of Denbury Resources, Inc. (DNR) looking to boost their income beyond the stock's 0.4% annualized dividend yield can sell the January 2016 covered call at the $22 strike and collect the premium based on the 75 cents bid, which annualizes to an additional 2.5% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 2.9% 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 DNR shares would have to advance 27.2% from current levels for that to occur, meaning that in the scenario where the stock is called, the shareholder has earned a 31.5% return from this trading level, in addition to any dividends collected before the stock was called.
How To YieldBoost Denbury Resources To 2.9% Using Options
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