How To YieldBoost Columbia Sportswear From 1.4% To 8% Using Options

Shareholders of Columbia Sportswear Co. (COLM) looking to boost their income beyond the stock's 1.4% annualized dividend yield can sell the July 2014 covered call at the $75 strike and collect the premium based on the $2.75 bid, which annualizes to an additional 6.6% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 8% annualized rate in the scenario where the stock is not called away. Any upside above $75 would be lost if the stock rises there and is called away, but COLM shares would have to advance 7.4% from current levels for that to happen, meaning that in the scenario where the stock is called, the shareholder has earned a 11.3% return from this trading level, in addition to any dividends collected before the stock was called.

START SLIDESHOW:
Top YieldBoost Calls of the S&P 500 »

In general, dividend amounts are not always predictable and tend to follow the ups and downs of profitability at each company. In the case of Columbia Sportswear Co., looking at the dividend history chart for COLM below can help in judging whether the most recent dividend is likely to continue, and in turn whether it is a reasonable expectation to expect a 1.4% annualized dividend yield.

COLM+Dividend+History+Chart

Below is a chart showing COLM's trailing twelve month trading history, with the $75 strike highlighted in red:

Loading+chart++2013+TickerTech.com

The chart above, and the stock's historical volatility, can be a helpful guide in combination with fundamental analysis to judge whether selling the July 2014 covered call at the $75 strike gives good reward for the risk of having given away the upside beyond $75. ( Do most options expire worthless? This and six other common options myths debunked). We calculate the trailing twelve month volatility for Columbia Sportswear Co. (considering the last 252 trading day closing values as well as today's price of $69.95) to be 21%. For other call options contract ideas at the various different available expirations, visit the COLM Stock Options page of StockOptionsChannel.com.

More from Stocks

Dow Futures Plunge, Global Markets Rocked as Trump Takes Trade War to Next Level

Dow Futures Plunge, Global Markets Rocked as Trump Takes Trade War to Next Level

Trump Issues New Trade Threats, Apple, ZTE, GameStop - 5 Things You Must Know

Trump Issues New Trade Threats, Apple, ZTE, GameStop - 5 Things You Must Know

50 Stocks That Could Be Shredded If a U.S. Trade War With China Ignites

50 Stocks That Could Be Shredded If a U.S. Trade War With China Ignites

China-Focused Stocks Hit Hard as Beijing Responds to Trump Tariff Threats

China-Focused Stocks Hit Hard as Beijing Responds to Trump Tariff Threats

12 Stocks That Make Up the GLUM Index

12 Stocks That Make Up the GLUM Index