YieldBoost Ashford Hospitality Trust From 6.9% To 17.6% Using Options
August 15, 2016 at 11:36 AM EDT
Shareholders of Ashford Hospitality Trust Inc (AHT) looking to boost their income beyond the stock's 6.9% annualized dividend yield can sell the December covered call at the $7.50 strike and collect the premium based on the 25 cents bid, which annualizes to an additional 10.7% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 17.6% annualized rate in the scenario where the stock is not called away. Any upside above $7.50 would be lost if the stock rises there and is called away, but AHT shares would have to climb 8.4% from current levels for that to occur, meaning that in the scenario where the stock is called, the shareholder has earned a 12% return from this trading level, in addition to any dividends collected before the stock was called.