Shareholders of Dominion Resources (D) looking to boost their income beyond the stock's 3.5% annualized dividend yield can sell the October covered call at the $70 strike and collect the premium based on the $1.65 bid, which annualizes to an additional 6.2% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 9.7% annualized rate in the scenario where the stock is not called away. Any upside above $70 would be lost if the stock rises there and is called away, but D shares would have to advance 2.3% from current levels for that to occur, meaning that in the scenario where the stock is called, the shareholder has earned a 4.7% return from this trading level, in addition to any dividends collected before the stock was called.
YieldBoost Dominion Resources From 3.5% To 9.7% Using Options
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