YieldBoost Keurig Green Mountain To 5.4% Using Options

Shareholders of Keurig Green Mountain Inc (GMCR) looking to boost their income beyond the stock's 0.8% annualized dividend yield can sell the January 2016 covered call at the $170 strike and collect the premium based on the $8.20 bid, which annualizes to an additional 4.6% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 5.4% annualized rate in the scenario where the stock is not called away. Any upside above $170 would be lost if the stock rises there and is called away, but GMCR shares would have to advance 40.2% from current levels for that to occur, meaning that in the scenario where the stock is called, the shareholder has earned a 46.9% return from this trading level, in addition to any dividends collected before the stock was called.
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