Strategy To YieldBoost Mattel To 12.6% Using Options

Shareholders of Mattel Inc (MAT) looking to boost their income beyond the stock's 6.1% annualized dividend yield can sell the October covered call at the $28 strike and collect the premium based on the 95 cents bid, which annualizes to an additional 6.5% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 12.6% annualized rate in the scenario where the stock is not called away. Any upside above $28 would be lost if the stock rises there and is called away, but MAT shares would have to climb 11.7% from current levels for that to occur, meaning that in the scenario where the stock is called, the shareholder has earned a 15.5% return from this trading level, in addition to any dividends collected before the stock was called.