How To YieldBoost American Railcar Industries From 3% To 24.2% Using Options

Shareholders of American Railcar Industries Inc (ARII) looking to boost their income beyond the stock's 3% annualized dividend yield can sell the September covered call at the $55 strike and collect the premium based on the $3.60 bid, which annualizes to an additional 21.2% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 24.2% annualized rate in the scenario where the stock is not called away. Any upside above $55 would be lost if the stock rises there and is called away, but ARII shares would have to climb 1.4% from current levels for that to happen, meaning that in the scenario where the stock is called, the shareholder has earned a 8.1% return from this trading level, in addition to any dividends collected before the stock was called.