How To YieldBoost Whirlpool To 6.3% Using Options

Shareholders of Whirlpool Corp (WHR) looking to boost their income beyond the stock's 2% annualized dividend yield can sell the January 2016 covered call at the $175 strike and collect the premium based on the $9.05 bid, which annualizes to an additional 4.3% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 6.3% annualized rate in the scenario where the stock is not called away. Any upside above $175 would be lost if the stock rises there and is called away, but WHR shares would have to climb 18.3% from current levels for that to happen, meaning that in the scenario where the stock is called, the shareholder has earned a 24.4% return from this trading level, in addition to any dividends collected before the stock was called.