YieldBoost Interdigital To 10.7% Using Options
January 17, 2017 at 11:36 AM EST
Shareholders of Interdigital Inc (IDCC) looking to boost their income beyond the stock's 1.4% annualized dividend yield can sell the June covered call at the $100 strike and collect the premium based on the $3.40 bid, which annualizes to an additional 9.3% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 10.7% annualized rate in the scenario where the stock is not called away. Any upside above $100 would be lost if the stock rises there and is called away, but IDCC shares would have to advance 12.6% from current levels for that to happen, meaning that in the scenario where the stock is called, the shareholder has earned a 16.4% return from this trading level, in addition to any dividends collected before the stock was called.