How To YieldBoost KLG To 19.4% Using Options
September 12, 2024 at 11:36 AM EDT
Shareholders of WK Kellogg Co (KLG) looking to boost their income beyond the stock's 3.5% annualized dividend yield can sell the December covered call at the $20 strike and collect the premium based on the 80 cents bid, which annualizes to an additional 15.9% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 19.4% annualized rate in the scenario where the stock is not called away. Any upside above $20 would be lost if the stock rises there and is called away, but KLG shares would have to climb 8.1% from current levels for that to occur, meaning that in the scenario where the stock is called, the shareholder has earned a 12.4% return from this trading level, in addition to any dividends collected before the stock was called.