Strategy To YieldBoost GEN From 1.9% To 18% Using Options
July 29, 2024 at 11:37 AM EDT
Shareholders of Gen Digital Inc (GEN) looking to boost their income beyond the stock's 1.9% annualized dividend yield can sell the November covered call at the $28 strike and collect the premium based on the $1.25 bid, which annualizes to an additional 16% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 18% annualized rate in the scenario where the stock is not called away. Any upside above $28 would be lost if the stock rises there and is called away, but GEN shares would have to advance 7.2% from current levels for that to occur, meaning that in the scenario where the stock is called, the shareholder has earned a 12% return from this trading level, in addition to any dividends collected before the stock was called.