YieldBoost Delek US Holdings To 15.8% Using Options
January 29, 2016 at 11:39 AM EST
Shareholders of Delek US Holdings Inc (DK) looking to boost their income beyond the stock's 3.7% annualized dividend yield can sell the July covered call at the $20 strike and collect the premium based on the 90 cents bid, which annualizes to an additional 12.1% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 15.8% 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 DK shares would have to climb 23.5% from current levels for that to happen, meaning that in the scenario where the stock is called, the shareholder has earned a 29.1% return from this trading level, in addition to any dividends collected before the stock was called.