How To YieldBoost Berkshire Hills Bancorp To 21% Using Options

Shareholders of Berkshire Hills Bancorp Inc (BHLB) looking to boost their income beyond the stock's 1.8% annualized dividend yield can sell the August covered call at the $30 strike and collect the premium based on the 10 cents bid, which annualizes to an additional 19.3% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 21% 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 BHLB shares would have to climb 10.8% from current levels for that to occur, meaning that in the scenario where the stock is called, the shareholder has earned a 11.2% return from this trading level, in addition to any dividends collected before the stock was called.
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