YieldBoost Argan To 16.2% Using Options
March 06, 2017 at 11:45 AM EST
Shareholders of Argan Inc (AGX) looking to boost their income beyond the stock's 1% annualized dividend yield can sell the July covered call at the $75 strike and collect the premium based on the $4.00 bid, which annualizes to an additional 15.2% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 16.2% annualized rate in the scenario where the stock is not called away. Any upside above $75 would be lost if the stock rises there and is called away, but AGX shares would have to advance 7% from current levels for that to happen, meaning that in the scenario where the stock is called, the shareholder has earned a 12.7% return from this trading level, in addition to any dividends collected before the stock was called.