How To YieldBoost LDOS From 3.4% To 6.2% Using Options

Shareholders of Leidos Holdings Inc (LDOS) looking to boost their income beyond the stock's 3.4% annualized dividend yield can sell the January 2016 covered call at the $45 strike and collect the premium based on the $1.80 bid, which annualizes to an additional 2.8% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 6.2% annualized rate in the scenario where the stock is not called away. Any upside above $45 would be lost if the stock rises there and is called away, but LDOS shares would have to climb 20.8% from current levels for that to occur, meaning that in the scenario where the stock is called, the shareholder has earned a 25.6% return from this trading level, in addition to any dividends collected before the stock was called.