How To YieldBoost Allegiant Travel Company From 0.6% To 11.3% Using Options

Shareholders of Allegiant Travel Company (ALGT) looking to boost their income beyond the stock's 0.6% annualized dividend yield can sell the October covered call at the $170 strike and collect the premium based on the $7.60 bid, which annualizes to an additional 10.6% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 11.3% annualized rate in the scenario where the stock is not called away. Any upside above $170 would be lost if the stock rises there and is called away, but ALGT shares would have to advance 7.6% from current levels for that to occur, meaning that in the scenario where the stock is called, the shareholder has earned a 12.4% return from this trading level, in addition to any dividends collected before the stock was called.