Strategy To YieldBoost AMP To 11.4% Using Options

Shareholders of Ameriprise Financial Inc (AMP) looking to boost their income beyond the stock's 3% annualized dividend yield can sell the December covered call at the $105 strike and collect the premium based on the $4.10 bid, which annualizes to an additional 8.4% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 11.4% annualized rate in the scenario where the stock is not called away. Any upside above $105 would be lost if the stock rises there and is called away, but AMP shares would have to advance 4.2% from current levels for that to happen, meaning that in the scenario where the stock is called, the shareholder has earned a 8.3% return from this trading level, in addition to any dividends collected before the stock was called.