How To YieldBoost SCHN From 2.1% To 22.2% Using Options

Shareholders of Schnitzer Steel Industries Inc (SCHN) looking to boost their income beyond the stock's 2.1% annualized dividend yield can sell the November covered call at the $37 strike and collect the premium based on the $2.50 bid, which annualizes to an additional 20.1% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 22.2% annualized rate in the scenario where the stock is not called away. Any upside above $37 would be lost if the stock rises there and is called away, but SCHN shares would have to climb 3.8% from current levels for that to occur, meaning that in the scenario where the stock is called, the shareholder has earned a 10.8% return from this trading level, in addition to any dividends collected before the stock was called.