How To YieldBoost Ameren To 9.9% Using Options

Shareholders of Ameren Corp (AEE) looking to boost their income beyond the stock's 3.5% annualized dividend yield can sell the December covered call at the $80 strike and collect the premium based on the $2.05 bid, which annualizes to an additional 6.4% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 9.9% annualized rate in the scenario where the stock is not called away. Any upside above $80 would be lost if the stock rises there and is called away, but AEE shares would have to advance 5.6% from current levels for that to occur, meaning that in the scenario where the stock is called, the shareholder has earned a 8.3% return from this trading level, in addition to any dividends collected before the stock was called.