YieldBoost MCHP From 2.1% To 15% Using Options

Shareholders of Microchip Technology Inc (MCHP) looking to boost their income beyond the stock's 2.1% annualized dividend yield can sell the July covered call at the $67.50 strike and collect the premium based on the $4.20 bid, which annualizes to an additional 12.8% 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 $67.50 would be lost if the stock rises there and is called away, but MCHP shares would have to advance 0.5% from current levels for that to happen, meaning that in the scenario where the stock is called, the shareholder has earned a 6.7% return from this trading level, in addition to any dividends collected before the stock was called.