YieldBoost EPM From 3.8% To 20.6% Using Options
June 23, 2017 at 11:36 AM EDT
Shareholders of Evolution Petroleum Corp (EPM) looking to boost their income beyond the stock's 3.8% annualized dividend yield can sell the October covered call at the $7.50 strike and collect the premium based on the 40 cents bid, which annualizes to an additional 16.8% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 20.6% annualized rate in the scenario where the stock is not called away. Any upside above $7.50 would be lost if the stock rises there and is called away, but EPM shares would have to climb 2.7% from current levels for that to occur, meaning that in the scenario where the stock is called, the shareholder has earned a 8.2% return from this trading level, in addition to any dividends collected before the stock was called.