Strategy To YieldBoost Barnes & Noble To 24.2% Using Options
December 07, 2016 at 11:38 AM EST
Shareholders of Barnes & Noble Inc (BKS) looking to boost their income beyond the stock's 4.8% annualized dividend yield can sell the April 2017 covered call at the $13 strike and collect the premium based on the 90 cents bid, which annualizes to an additional 19.4% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 24.2% annualized rate in the scenario where the stock is not called away. Any upside above $13 would be lost if the stock rises there and is called away, but BKS shares would have to climb 3.6% from current levels for that to happen, 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.