YieldBoost SAFM From 0.8% To 18.2% Using Options

Shareholders of Sanderson Farms Inc (SAFM) looking to boost their income beyond the stock's 0.8% annualized dividend yield can sell the May 2020 covered call at the $170 strike and collect the premium based on the $14.00 bid, which annualizes to an additional 17.4% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 18.2% annualized rate in the scenario where the stock is not called away. Any upside above $170 would be lost if the stock rises there and is called away, but SAFM shares would have to climb 2.4% from current levels for that to happen, meaning that in the scenario where the stock is called, the shareholder has earned a 10.9% return from this trading level, in addition to any dividends collected before the stock was called.
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