Strategy To YieldBoost NutriSystem To 21.3% Using Options

Shareholders of NutriSystem Inc (NTRI) looking to boost their income beyond the stock's 4.5% annualized dividend yield can sell the March 2015 covered call at the $16 strike and collect the premium based on the $1.15 bid, which annualizes to an additional 16.7% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 21.3% annualized rate in the scenario where the stock is not called away. Any upside above $16 would be lost if the stock rises there and is called away, but NTRI shares would have to climb 4% from current levels for that to occur, meaning that in the scenario where the stock is called, the shareholder has earned a 11.4% return from this trading level, in addition to any dividends collected before the stock was called.