Strategy To YieldBoost ED From 3.5% To 14.8% Using Options

Shareholders of Consolidated Edison Inc (ED) looking to boost their income beyond the stock's 3.5% annualized dividend yield can sell the November covered call at the $95 strike and collect the premium based on the $3.50 bid, which annualizes to an additional 11.3% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 14.8% annualized rate in the scenario where the stock is not called away. Any upside above $95 would be lost if the stock rises there and is called away, but ED shares would have to advance 0.6% from current levels for that to happen, meaning that in the scenario where the stock is called, the shareholder has earned a 4.3% return from this trading level, in addition to any dividends collected before the stock was called.