YieldBoost Johnson Controls To 9.2% Using Options

Shareholders of Johnson Controls Inc (JCI) looking to boost their income beyond the stock's 2% annualized dividend yield can sell the January 2016 covered call at the $52.50 strike and collect the premium based on the $2.95 bid, which annualizes to an additional 7.1% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 9.2% annualized rate in the scenario where the stock is not called away. Any upside above $52.50 would be lost if the stock rises there and is called away, but JCI shares would have to advance 3.5% from current levels for that to happen, meaning that in the scenario where the stock is called, the shareholder has earned a 9.4% return from this trading level, in addition to any dividends collected before the stock was called.