Strategy To YieldBoost LKQ To 11.1% Using Options

Shareholders of LKQ Corp (LKQ) looking to boost their income beyond the stock's 2.6% annualized dividend yield can sell the November covered call at the $50 strike and collect the premium based on the $1.30 bid, which annualizes to an additional 8.6% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 11.1% annualized rate in the scenario where the stock is not called away. Any upside above $50 would be lost if the stock rises there and is called away, but LKQ shares would have to advance 8.1% 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.