YieldBoost NXST From 1.3% To 17.6% Using Options
April 10, 2015 at 11:35 AM EDT
Shareholders of Nexstar Broadcasting Group Inc (NXST) looking to boost their income beyond the stock's 1.3% annualized dividend yield can sell the August covered call at the $60 strike and collect the premium based on the $3.50 bid, which annualizes to an additional 16.3% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 17.6% annualized rate in the scenario where the stock is not called away. Any upside above $60 would be lost if the stock rises there and is called away, but NXST shares would have to climb 1.9% from current levels for that to happen, meaning that in the scenario where the stock is called, the shareholder has earned a 7.8% return from this trading level, in addition to any dividends collected before the stock was called.