YieldBoost AGX To 18.9% Using Options
July 13, 2018 at 11:54 AM EDT
Shareholders of Argan Inc (AGX) looking to boost their income beyond the stock's 2.5% annualized dividend yield can sell the January 2019 covered call at the $42.50 strike and collect the premium based on the $3.50 bid, which annualizes to an additional 16.4% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 18.9% annualized rate in the scenario where the stock is not called away. Any upside above $42.50 would be lost if the stock rises there and is called away, but AGX shares would have to advance 3.3% from current levels for that to happen, meaning that in the scenario where the stock is called, the shareholder has earned a 11.8% return from this trading level, in addition to any dividends collected before the stock was called.