How To YieldBoost KRO From 4.5% To 18.5% Using Options

Shareholders of Kronos Worldwide Inc (KRO) looking to boost their income beyond the stock's 4.5% annualized dividend yield can sell the May covered call at the $15 strike and collect the premium based on the 50 cents bid, which annualizes to an additional 14% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 18.5% annualized rate in the scenario where the stock is not called away. Any upside above $15 would be lost if the stock rises there and is called away, but KRO shares would have to climb 12.7% from current levels for that to happen, meaning that in the scenario where the stock is called, the shareholder has earned a 16.5% return from this trading level, in addition to any dividends collected before the stock was called.