How To YieldBoost Signet Jewelers To 15.9% Using Options

Shareholders of Signet Jewelers Ltd (SIG) looking to boost their income beyond the stock's 0.7% annualized dividend yield can sell the October covered call at the $100 strike and collect the premium based on the $7.40 bid, which annualizes to an additional 15.2% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 15.9% annualized rate in the scenario where the stock is not called away. Any upside above $100 would be lost if the stock rises there and is called away, but SIG shares would have to advance 0% from current levels for that to occur, meaning that in the scenario where the stock is called, the shareholder has earned a 7.4% return from this trading level, in addition to any dividends collected before the stock was called.