Strategy To YieldBoost HOMB From 2% To 16.2% Using Options

Shareholders of Home BancShares Inc (HOMB) looking to boost their income beyond the stock's 2% annualized dividend yield can sell the March 2018 covered call at the $22.50 strike and collect the premium based on the $1.00 bid, which annualizes to an additional 14.1% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 16.2% annualized rate in the scenario where the stock is not called away. Any upside above $22.50 would be lost if the stock rises there and is called away, but HOMB shares would have to advance 3.7% from current levels for that to happen, meaning that in the scenario where the stock is called, the shareholder has earned a 8.3% return from this trading level, in addition to any dividends collected before the stock was called.