YieldBoost Retail Opportunity Investments To 30.6% Using Options
August 07, 2024 at 11:41 AM EDT
Shareholders of Retail Opportunity Investments Corp (ROIC) looking to boost their income beyond the stock's 4% annualized dividend yield can sell the August covered call at the $20 strike and collect the premium based on the 10 cents bid, which annualizes to an additional 26.7% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 30.6% 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 ROIC shares would have to climb 31.6% from current levels for that to occur, meaning that in the scenario where the stock is called, the shareholder has earned a 32.2% return from this trading level, in addition to any dividends collected before the stock was called.