YieldBoost Quanex Building Products To 14.9% Using Options
March 20, 2015 at 11:36 AM EDT
Shareholders of Quanex Building Products Corp (NX) looking to boost their income beyond the stock's 0.8% annualized dividend yield can sell the September covered call at the $20 strike and collect the premium based on the $1.40 bid, which annualizes to an additional 14.1% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 14.9% annualized rate in the scenario where the stock is not called away. Any upside above $20 would be lost if the stock rises there and is called away, but NX shares would have to climb 0.1% from current levels for that to happen, meaning that in the scenario where the stock is called, the shareholder has earned a 7% return from this trading level, in addition to any dividends collected before the stock was called.