Strategy To YieldBoost Tessera Technologies To 10.3% Using Options

Shareholders of Tessera Technologies Inc (TSRA) looking to boost their income beyond the stock's 1.2% annualized dividend yield can sell the June covered call at the $37 strike and collect the premium based on the $1.35 bid, which annualizes to an additional 9.1% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 10.3% annualized rate in the scenario where the stock is not called away. Any upside above $37 would be lost if the stock rises there and is called away, but TSRA shares would have to advance 10.3% from current levels for that to happen, meaning that in the scenario where the stock is called, the shareholder has earned a 14.4% return from this trading level, in addition to any dividends collected before the stock was called.