YieldBoost BAGL To 11.7% Using Options
September 03, 2014 at 11:34 AM EDT
Shareholders of Einstein Noah Restaurant Group Inc (BAGL) looking to boost their income beyond the stock's 3.7% annualized dividend yield can sell the April 2015 covered call at the $15 strike and collect the premium based on the 70 cents bid, which annualizes to an additional 8% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 11.7% annualized rate in the scenario where the stock is not called away. Any upside above $15 would be lost if the stock rises there and is called away, but BAGL shares would have to advance 5.9% from current levels for that to occur, meaning that in the scenario where the stock is called, the shareholder has earned a 10.8% return from this trading level, in addition to any dividends collected before the stock was called.