YieldBoost Delek US Holdings From 2.1% To 10.1% Using Options
June 30, 2014 at 11:40 AM EDT
Shareholders of Delek US Holdings (DK) looking to boost their income beyond the stock's 2.1% annualized dividend yield can sell the January 2015 covered call at the $32.50 strike and collect the premium based on the $1.25 bid, which annualizes to an additional 8% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 10.1% annualized rate in the scenario where the stock is not called away. Any upside above $32.50 would be lost if the stock rises there and is called away, but DK shares would have to climb 14.1% from current levels for that to occur, meaning that in the scenario where the stock is called, the shareholder has earned a 18.5% return from this trading level, in addition to any dividends collected before the stock was called.