How To YieldBoost NGP Capital Resources Co To 18.8% Using Options

Shareholders of NGP Capital Resources Co (NGPC) looking to boost their income beyond the stock's 10.2% annualized dividend yield can sell the July covered call at the $7.50 strike and collect the premium based on the 10 cents bid, which annualizes to an additional 8.6% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 18.8% annualized rate in the scenario where the stock is not called away. Any upside above $7.50 would be lost if the stock rises there and is called away, but NGPC shares would have to climb 20% 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.