YieldBoost ALGT From 0.6% To 10% Using Options

Shareholders of Allegiant Travel Company (ALGT) looking to boost their income beyond the stock's 0.6% annualized dividend yield can sell the April 2016 covered call at the $220 strike and collect the premium based on the $8.20 bid, which annualizes to an additional 9.4% 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 $220 would be lost if the stock rises there and is called away, but ALGT shares would have to advance 11.1% from current levels for that to occur, meaning that in the scenario where the stock is called, the shareholder has earned a 15.2% return from this trading level, in addition to any dividends collected before the stock was called.