YieldBoost Ingles Markets To 7.4% Using Options

Shareholders of Ingles Markets Inc (IMKTA) looking to boost their income beyond the stock's 2% annualized dividend yield can sell the February 2018 covered call at the $40 strike and collect the premium based on the $1.15 bid, which annualizes to an additional 5.4% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 7.4% annualized rate in the scenario where the stock is not called away. Any upside above $40 would be lost if the stock rises there and is called away, but IMKTA shares would have to advance 23.1% from current levels for that to occur, meaning that in the scenario where the stock is called, the shareholder has earned a 26.6% return from this trading level, in addition to any dividends collected before the stock was called.