How To YieldBoost Financial Engines From 0.5% To 6.9% Using Options

Shareholders of Financial Engines Inc (FNGN) looking to boost their income beyond the stock's 0.5% annualized dividend yield can sell the December covered call at the $55 strike and collect the premium based on the $1.40 bid, which annualizes to an additional 6.4% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 6.9% annualized rate in the scenario where the stock is not called away. Any upside above $55 would be lost if the stock rises there and is called away, but FNGN shares would have to advance 19.3% from current levels for that to happen, meaning that in the scenario where the stock is called, the shareholder has earned a 22.4% return from this trading level, in addition to any dividends collected before the stock was called.