YieldBoost NRG Energy From 1.1% To 24.8% Using Options

Shareholders of NRG Energy Inc (NRG) looking to boost their income beyond the stock's 1.1% annualized dividend yield can sell the January 2017 covered call at the $12 strike and collect the premium based on the 90 cents bid, which annualizes to an additional 23.8% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 24.8% annualized rate in the scenario where the stock is not called away. Any upside above $12 would be lost if the stock rises there and is called away, but NRG shares would have to climb 6.8% from current levels for that to happen, meaning that in the scenario where the stock is called, the shareholder has earned a 14.8% return from this trading level, in addition to any dividends collected before the stock was called.