YieldBoost DXC Technology To 3.4% Using Options
October 23, 2017 at 11:41 AM EDT
Shareholders of DXC Technology Co (DXC) looking to boost their income beyond the stock's 0.8% annualized dividend yield can sell the January 2019 covered call at the $110 strike and collect the premium based on the $3.00 bid, which annualizes to an additional 2.6% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 3.4% annualized rate in the scenario where the stock is not called away. Any upside above $110 would be lost if the stock rises there and is called away, but DXC shares would have to climb 20% from current levels for that to happen, meaning that in the scenario where the stock is called, the shareholder has earned a 23.3% return from this trading level, in addition to any dividends collected before the stock was called.