How To YieldBoost TJX Companies To 6% Using Options
May 23, 2016 at 11:43 AM EDT
Shareholders of TJX Companies (TJX) looking to boost their income beyond the stock's 1.4% annualized dividend yield can sell the January 2018 covered call at the $82.50 strike and collect the premium based on the $5.80 bid, which annualizes to an additional 4.6% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 6% annualized rate in the scenario where the stock is not called away. Any upside above $82.50 would be lost if the stock rises there and is called away, but TJX shares would have to advance 9.7% from current levels for that to occur, meaning that in the scenario where the stock is called, the shareholder has earned a 17.4% return from this trading level, in addition to any dividends collected before the stock was called.