Strategy To YieldBoost Green Plains To 5.8% Using Options

Shareholders of Green Plains Inc. ( GPRE) looking to boost their income beyond the stock's 1.1% annualized dividend yield can sell the January 2017 covered call at the $45 strike and collect the premium based on the $2.30 bid, which annualizes to an additional 4.7% 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 $45 would be lost if the stock rises there and is called away, but GPRE shares would have to advance 46.4% from current levels for that to happen, meaning that in the scenario where the stock is called, the shareholder has earned a 53.9% return from this trading level, in addition to any dividends collected before the stock was called.

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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 Green Plains Inc., looking at the dividend history chart for GPRE 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 1.1% annualized dividend yield.

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