YieldBoost Embecta To 56.3% Using Options
July 23, 2024 at 11:43 AM EDT
Shareholders of Embecta Corp (EMBC) looking to boost their income beyond the stock's 3.8% annualized dividend yield can sell the August covered call at the $17.50 strike and collect the premium based on the 55 cents bid, which annualizes to an additional 52.5% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 56.3% annualized rate in the scenario where the stock is not called away. Any upside above $17.50 would be lost if the stock rises there and is called away, but EMBC shares would have to climb 9.9% from current levels for that to happen, meaning that in the scenario where the stock is called, the shareholder has earned a 13.3% return from this trading level, in addition to any dividends collected before the stock was called.