How To YieldBoost COBZ From 1.2% To 10.3% Using Options
March 13, 2014 at 11:43 AM EDT
Shareholders of CoBiz Financial (COBZ) looking to boost their income beyond the stock's 1.2% annualized dividend yield can sell the August covered call at the $12.50 strike and collect the premium based on the 45 cents bid, which annualizes to an additional 9.1% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 10.3% annualized rate in the scenario where the stock is not called away. Any upside above $12.50 would be lost if the stock rises there and is called away, but COBZ shares would have to climb 8.4% from current levels for that to occur, meaning that in the scenario where the stock is called, the shareholder has earned a 12.3% return from this trading level, in addition to any dividends collected before the stock was called.