YieldBoost Equinix From 1.9% To 10% Using Options
June 21, 2017 at 11:32 AM EDT
Shareholders of Equinix Inc (EQIX) looking to boost their income beyond the stock's 1.9% annualized dividend yield can sell the December covered call at the $450 strike and collect the premium based on the $17.00 bid, which annualizes to an additional 8.1% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 10% annualized rate in the scenario where the stock is not called away. Any upside above $450 would be lost if the stock rises there and is called away, but EQIX shares would have to climb 4.2% from current levels for that to occur, meaning that in the scenario where the stock is called, the shareholder has earned a 8.1% return from this trading level, in addition to any dividends collected before the stock was called.
