YieldBoost Seagate Technology To 11.8% Using Options

Shareholders of Seagate Technology plc (STX) looking to boost their income beyond the stock's 5.3% annualized dividend yield can sell the January 2018 covered call at the $55 strike and collect the premium based on the $2.79 bid, which annualizes to an additional 6.5% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 11.8% annualized rate in the scenario where the stock is not called away. Any upside above $55 would be lost if the stock rises there and is called away, but STX shares would have to climb 16.4% from current levels for that to occur, meaning that in the scenario where the stock is called, the shareholder has earned a 22.3% return from this trading level, in addition to any dividends collected before the stock was called.