YieldBoost Paychex To 8.2% Using Options

Shareholders of Paychex Inc (PAYX) looking to boost their income beyond the stock's 2.9% annualized dividend yield can sell the January 2021 covered call at the $87.50 strike and collect the premium based on the $5.10 bid, which annualizes to an additional 5.3% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 8.2% annualized rate in the scenario where the stock is not called away. Any upside above $87.50 would be lost if the stock rises there and is called away, but PAYX shares would have to climb 3.3% from current levels for that to happen, meaning that in the scenario where the stock is called, the shareholder has earned a 9.3% return from this trading level, in addition to any dividends collected before the stock was called.