Shareholders of General Motors Co. (GM) looking to boost their income beyond the stock's 3.2% annualized dividend yield can sell the January 2016 covered call at the $47 strike and collect the premium based on the $1.30 bid, which annualizes to an additional 2.2% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 5.4% annualized rate in the scenario where the stock is not called away. Any upside above $47 would be lost if the stock rises there and is called away, but GM shares would have to climb 23.8% from current levels for that to happen, meaning that in the scenario where the stock is called, the shareholder has earned a 27.2% return from this trading level, in addition to any dividends collected before the stock was called.
YieldBoost GM From 3.2% To 5.4% Using Options
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