YieldBoost Pool From 1.4% To 16.7% Using Options
July 15, 2024 at 11:37 AM EDT
Shareholders of Pool Corp (POOL) looking to boost their income beyond the stock's 1.4% annualized dividend yield can sell the October covered call at the $350 strike and collect the premium based on the $13.20 bid, which annualizes to an additional 15.2% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 16.7% annualized rate in the scenario where the stock is not called away. Any upside above $350 would be lost if the stock rises there and is called away, but POOL shares would have to climb 5% from current levels for that to occur, meaning that in the scenario where the stock is called, the shareholder has earned a 8.9% return from this trading level, in addition to any dividends collected before the stock was called.