Strategy To YieldBoost ROP From 0.6% To 13.7% Using Options
August 15, 2024 at 11:38 AM EDT
Shareholders of Roper Technologies Inc (ROP) looking to boost their income beyond the stock's 0.6% annualized dividend yield can sell the November covered call at the $550 strike and collect the premium based on the $17.90 bid, which annualizes to an additional 13.1% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 13.7% annualized rate in the scenario where the stock is not called away. Any upside above $550 would be lost if the stock rises there and is called away, but ROP shares would have to climb 1.6% from current levels for that to happen, meaning that in the scenario where the stock is called, the shareholder has earned a 4.9% return from this trading level, in addition to any dividends collected before the stock was called.