Shareholders of Frontier Communications Corp (FTR) looking to boost their income beyond the stock's 6.7% annualized dividend yield can sell the June covered call at the $6 strike and collect the premium based on the 15 cents bid, which annualizes to an additional 18.3% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 25.1% annualized rate in the scenario where the stock is not called away. Any upside above $6 would be lost if the stock rises there and is called away, but FTR shares would have to climb 0.5% from current levels for that to occur, meaning that in the scenario where the stock is called, the shareholder has earned a 3% return from this trading level, in addition to any dividends collected before the stock was called.
YieldBoost Frontier Communications From 6.7% To 25.1% Using Options
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