YieldBoost CNX To 5.1% Using Options
March 21, 2014 at 11:41 AM EDT
Shareholders of CONSOL Energy (CNX) looking to boost their income beyond the stock's 0.6% annualized dividend yield can sell the January 2016 covered call at the $50 strike and collect the premium based on the $3.30 bid, which annualizes to an additional 4.4% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 5.1% annualized rate in the scenario where the stock is not called away. Any upside above $50 would be lost if the stock rises there and is called away, but CNX shares would have to climb 22.7% from current levels for that to occur, meaning that in the scenario where the stock is called, the shareholder has earned a 30.8% return from this trading level, in addition to any dividends collected before the stock was called.