Strategy To YieldBoost Quanex Building Products From 1.2% To 26.2% Using Options

Shareholders of Quanex Building Products Corp (NX) looking to boost their income beyond the stock's 1.2% annualized dividend yield can sell the September covered call at the $30 strike and collect the premium based on the 55 cents bid, which annualizes to an additional 25% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 26.2% annualized rate in the scenario where the stock is not called away. Any upside above $30 would be lost if the stock rises there and is called away, but NX shares would have to advance 8.5% from current levels for that to happen, meaning that in the scenario where the stock is called, the shareholder has earned a 10.5% return from this trading level, in addition to any dividends collected before the stock was called.