YieldBoost SEE To 6.9% Using Options
March 21, 2017 at 11:55 AM EDT
Shareholders of Sealed Air Corp (SEE) looking to boost their income beyond the stock's 1.4% annualized dividend yield can sell the January 2018 covered call at the $50 strike and collect the premium based on the $2.10 bid, which annualizes to an additional 5.5% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 6.9% annualized rate in the scenario where the stock is not called away. Any upside above $50 would be lost if the stock rises there and is called away, but SEE shares would have to advance 9.6% from current levels for that to occur, meaning that in the scenario where the stock is called, the shareholder has earned a 14.2% return from this trading level, in addition to any dividends collected before the stock was called.