YieldBoost Hackett Group To 23.2% Using Options
January 20, 2017 at 13:05 PM EST
Shareholders of Hackett Group Inc (HCKT) looking to boost their income beyond the stock's 1.5% annualized dividend yield can sell the May covered call at the $17.50 strike and collect the premium based on the $1.20 bid, which annualizes to an additional 21.7% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 23.2% annualized rate in the scenario where the stock is not called away. Any upside above $17.50 would be lost if the stock rises there and is called away, but HCKT shares would have to advance 2.9% from current levels for that to happen, meaning that in the scenario where the stock is called, the shareholder has earned a 10% return from this trading level, in addition to any dividends collected before the stock was called.