How To YieldBoost PHX To 19.8% Using Options

Shareholders of Panhandle Oil & Gas Inc (PHX) looking to boost their income beyond the stock's 0.5% annualized dividend yield can sell the February 2015 covered call at the $65 strike and collect the premium based on the $5.20 bid, which annualizes to an additional 19.3% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 19.8% annualized rate in the scenario where the stock is not called away. Any upside above $65 would be lost if the stock rises there and is called away, but PHX shares would have to climb 1.7% from current levels for that to happen, meaning that in the scenario where the stock is called, the shareholder has earned a 9.8% return from this trading level, in addition to any dividends collected before the stock was called.