YieldBoost WWE To 7.9% Using Options
June 23, 2015 at 11:42 AM EDT
Shareholders of World Wrestling Entertainment Inc (WWE) looking to boost their income beyond the stock's 2.9% annualized dividend yield can sell the January 2017 covered call at the $20 strike and collect the premium based on the $1.30 bid, which annualizes to an additional 5% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 7.9% 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 WWE shares would have to advance 21.5% from current levels for that to occur, meaning that in the scenario where the stock is called, the shareholder has earned a 29.4% return from this trading level, in addition to any dividends collected before the stock was called.