How To YieldBoost MKTX From 1.2% To 13.9% Using Options
August 29, 2024 at 11:33 AM EDT
Shareholders of Marketaxess Holdings Inc (MKTX) looking to boost their income beyond the stock's 1.2% annualized dividend yield can sell the February 2025 covered call at the $260 strike and collect the premium based on the $15.10 bid, which annualizes to an additional 12.7% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 13.9% annualized rate in the scenario where the stock is not called away. Any upside above $260 would be lost if the stock rises there and is called away, but MKTX shares would have to advance 5.5% from current levels for that to happen, meaning that in the scenario where the stock is called, the shareholder has earned a 11.6% return from this trading level, in addition to any dividends collected before the stock was called.