Shareholders of AmTrust Financial Services (AFSI) looking to boost their income beyond the stock's 1.9% annualized dividend yield can sell the December covered call at the $42.50 strike and collect the premium based on the $3.20 bid, which annualizes to an additional 16.2% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 18.1% annualized rate in the scenario where the stock is not called away. Any upside above $42.50 would be lost if the stock rises there and is called away, but AFSI shares would have to climb 0.8% from current levels for that to happen, meaning that in the scenario where the stock is called, the shareholder has earned a 8.3% return from this trading level, in addition to any dividends collected before the stock was called.
Strategy To YieldBoost AFSI To 18.1% Using Options
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