YieldBoost EQIX To 10% Using Options
June 24, 2015 at 11:36 AM EDT
Shareholders of Equinix, Inc (EQIX) looking to boost their income beyond the stock's 2.6% annualized dividend yield can sell the December covered call at the $270 strike and collect the premium based on the $9.20 bid, which annualizes to an additional 7.4% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 10% annualized rate in the scenario where the stock is not called away. Any upside above $270 would be lost if the stock rises there and is called away, but EQIX shares would have to climb 4.8% from current levels for that to happen, meaning that in the scenario where the stock is called, the shareholder has earned a 8.4% return from this trading level, in addition to any dividends collected before the stock was called.