YieldBoost Halliburton Company From 1.3% To 7.6% Using Options
February 21, 2017 at 12:03 PM EST
Shareholders of Halliburton Company (HAL) looking to boost their income beyond the stock's 1.3% annualized dividend yield can sell the January 2018 covered call at the $62.50 strike and collect the premium based on the $3.10 bid, which annualizes to an additional 6.2% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 7.6% annualized rate in the scenario where the stock is not called away. Any upside above $62.50 would be lost if the stock rises there and is called away, but HAL shares would have to advance 14.4% from current levels for that to happen, meaning that in the scenario where the stock is called, the shareholder has earned a 20.1% return from this trading level, in addition to any dividends collected before the stock was called.