Strategy To YieldBoost CMC Materials To 17.3% Using Options

Shareholders of CMC Materials Inc (CCMP) looking to boost their income beyond the stock's 1.5% annualized dividend yield can sell the April 2022 covered call at the $130 strike and collect the premium based on the $12.60 bid, which annualizes to an additional 15.8% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 17.3% annualized rate in the scenario where the stock is not called away. Any upside above $130 would be lost if the stock rises there and is called away, but CCMP shares would have to advance 4% from current levels for that to happen, meaning that in the scenario where the stock is called, the shareholder has earned a 14% return from this trading level, in addition to any dividends collected before the stock was called.