Strategy To YieldBoost ENR To 11.6% Using Options
July 08, 2016 at 11:43 AM EDT
Shareholders of Energizer Holdings Inc (ENR) looking to boost their income beyond the stock's 2% annualized dividend yield can sell the February 2017 covered call at the $55 strike and collect the premium based on the $3.00 bid, which annualizes to an additional 9.6% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 11.6% 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 ENR shares would have to advance 8.4% from current levels for that to happen, meaning that in the scenario where the stock is called, the shareholder has earned a 14.3% return from this trading level, in addition to any dividends collected before the stock was called.