How To YieldBoost AXLL From 1.3% To 17.7% Using Options
April 08, 2014 at 11:47 AM EDT
Shareholders of Axiall Corp (AXLL) looking to boost their income beyond the stock's 1.3% annualized dividend yield can sell the August covered call at the $50 strike and collect the premium based on the $2.80 bid, which annualizes to an additional 16.4% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 17.7% 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 AXLL shares would have to advance 4.1% from current levels for that to happen, meaning that in the scenario where the stock is called, the shareholder has earned a 9.9% return from this trading level, in addition to any dividends collected before the stock was called.