How To YieldBoost American Railcar Industries From 2.9% To 15% Using Options

Shareholders of American Railcar Industries Inc (ARII) looking to boost their income beyond the stock's 2.9% annualized dividend yield can sell the September covered call at the $60 strike and collect the premium based on the $3.80 bid, which annualizes to an additional 12.1% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 15% annualized rate in the scenario where the stock is not called away. Any upside above $60 would be lost if the stock rises there and is called away, but ARII shares would have to advance 8.5% from current levels for that to happen, meaning that in the scenario where the stock is called, the shareholder has earned a 15.4% return from this trading level, in addition to any dividends collected before the stock was called.