YieldBoost MHLD To 25% Using Options
December 06, 2017 at 11:29 AM EST
Shareholders of Maiden Holdings Ltd (MHLD) looking to boost their income beyond the stock's 8.8% annualized dividend yield can sell the May 2018 covered call at the $7.50 strike and collect the premium based on the 50 cents bid, which annualizes to an additional 16.3% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 25% 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 MHLD shares would have to advance 9% from current levels for that to happen, meaning that in the scenario where the stock is called, the shareholder has earned a 16.3% return from this trading level, in addition to any dividends collected before the stock was called.