Strategy To YieldBoost PRG From 1.4% To 13.1% Using Options

Shareholders of PROG Holdings Inc (PRG) looking to boost their income beyond the stock's 1.4% annualized dividend yield can sell the December covered call at the $40 strike and collect the premium based on the $2.00 bid, which annualizes to an additional 11.8% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 13.1% annualized rate in the scenario where the stock is not called away. Any upside above $40 would be lost if the stock rises there and is called away, but PRG shares would have to climb 14.1% from current levels for that to occur, meaning that in the scenario where the stock is called, the shareholder has earned a 19.8% return from this trading level, in addition to any dividends collected before the stock was called.