YieldBoost BLK From 3% To 6% Using Options
June 10, 2019 at 11:39 AM EDT
Shareholders of Blackrock Inc (BLK) looking to boost their income beyond the stock's 3% annualized dividend yield can sell the January 2021 covered call at the $520 strike and collect the premium based on the $21.80 bid, which annualizes to an additional 3% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 6% annualized rate in the scenario where the stock is not called away. Any upside above $520 would be lost if the stock rises there and is called away, but BLK shares would have to climb 16.7% from current levels for that to occur, meaning that in the scenario where the stock is called, the shareholder has earned a 21.6% return from this trading level, in addition to any dividends collected before the stock was called.