YieldBoost Bon-Ton Stores From 1.8% To 14.4% Using Options

Shareholders of Bon-Ton Stores Inc (BONT) looking to boost their income beyond the stock's 1.8% annualized dividend yield can sell the January 2015 covered call at the $12 strike and collect the premium based on the 55 cents bid, which annualizes to an additional 12.6% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 14.4% annualized rate in the scenario where the stock is not called away. Any upside above $12 would be lost if the stock rises there and is called away, but BONT shares would have to advance 8% from current levels for that to happen, meaning that in the scenario where the stock is called, the shareholder has earned a 13% return from this trading level, in addition to any dividends collected before the stock was called.