YieldBoost HP To 4.2% Using Options

Shareholders of Hewlett-Packard Co (NYSE: HPQ) looking to boost their income beyond the stock’s 1.7% annualized dividend yield can sell the January 2017 covered call at the $47 strike and collect the premium based on the $2.04 bid, which annualizes to an additional 2.5% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 4.2% annualized rate in the scenario where the stock is not called away. Any upside above $47 would be lost if the stock rises there and is called away, but HPQ shares would have to climb 26.1% from current levels for that to occur, meaning that in the scenario where the stock is called, the shareholder has earned a 31.5% return from this trading level, in addition to any dividends collected before the stock was called.
Source: Markets