Shareholders of Philip Morris International Inc (PM) looking to boost their income beyond the stock's 4.4% annualized dividend yield can sell the September covered call at the $87.50 strike and collect the premium based on the $1.88 bid, which annualizes to an additional 5.9% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 10.3% annualized rate in the scenario where the stock is not called away. Any upside above $87.50 would be lost if the stock rises there and is called away, but PM shares would have to climb 1.7% from current levels for that to occur, meaning that in the scenario where the stock is called, the shareholder has earned a 3.8% return from this trading level, in addition to any dividends collected before the stock was called.
YieldBoost Philip Morris To 10.3% Using Options
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