YieldBoost CST Brands To 7.4% Using Options

Shareholders of CST Brands Inc (CST) looking to boost their income beyond the stock's 0.8% annualized dividend yield can sell the December covered call at the $34 strike and collect the premium based on the $1.35 bid, which annualizes to an additional 6.5% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 7.4% annualized rate in the scenario where the stock is not called away. Any upside above $34 would be lost if the stock rises there and is called away, but CST shares would have to advance 9% from current levels for that to occur, meaning that in the scenario where the stock is called, the shareholder has earned a 13.3% return from this trading level, in addition to any dividends collected before the stock was called.