How To YieldBoost BONT From 3.6% To 19.8% Using Options

Shareholders of Bon-Ton Stores Inc (BONT) looking to boost their income beyond the stock's 3.6% annualized dividend yield can sell the July covered call at the $6 strike and collect the premium based on the 35 cents bid, which annualizes to an additional 16.2% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 19.8% annualized rate in the scenario where the stock is not called away. Any upside above $6 would be lost if the stock rises there and is called away, but BONT shares would have to advance 8.7% from current levels for that to happen, meaning that in the scenario where the stock is called, the shareholder has earned a 15% return from this trading level, in addition to any dividends collected before the stock was called.