Strategy To YieldBoost Ameriprise Financial To 11.6% Using Options
July 21, 2015 at 11:31 AM EDT
Shareholders of Ameriprise Financial Inc (AMP) looking to boost their income beyond the stock's 2.1% annualized dividend yield can sell the December covered call at the $130 strike and collect the premium based on the $5.00 bid, which annualizes to an additional 9.5% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 11.6% annualized rate in the scenario where the stock is not called away. Any upside above $130 would be lost if the stock rises there and is called away, but AMP shares would have to climb 1.4% from current levels for that to happen, meaning that in the scenario where the stock is called, the shareholder has earned a 5.3% return from this trading level, in addition to any dividends collected before the stock was called.