Shareholders of Leucadia National Corp. (LUK) looking to boost their income beyond the stock's 1% annualized dividend yield can sell the December covered call at the $27.50 strike and collect the premium based on the 70 cents bid, which annualizes to an additional 4.8% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 5.8% annualized rate in the scenario where the stock is not called away. Any upside above $27.50 would be lost if the stock rises there and is called away, but LUK shares would have to advance 7.1% from current levels for that to happen, meaning that in the scenario where the stock is called, the shareholder has earned a 9.9% return from this trading level, in addition to any dividends collected before the stock was called.
YieldBoost LUK From 1% To 5.8% Using Options
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