YieldBoost ED To 6.1% Using Options

Shareholders of Consolidated Edison Inc (ED) looking to boost their income beyond the stock's 3.5% annualized dividend yield can sell the August covered call at the $90 strike and collect the premium based on the 95 cents 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 6.1% annualized rate in the scenario where the stock is not called away. Any upside above $90 would be lost if the stock rises there and is called away, but ED shares would have to advance 5.7% from current levels for that to occur, meaning that in the scenario where the stock is called, the shareholder has earned a 6.8% return from this trading level, in addition to any dividends collected before the stock was called.