YieldBoost Chimera Investment From 9.5% To 25.8% Using Options

Shareholders of Chimera Investment Corp (CIM) looking to boost their income beyond the stock's 9.5% annualized dividend yield can sell the July covered call at the $7 strike and collect the premium based on the 25 cents bid, which annualizes to an additional 16.3% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 25.8% annualized rate in the scenario where the stock is not called away. Any upside above $7 would be lost if the stock rises there and is called away, but CIM shares would have to advance 49.9% from current levels for that to happen, meaning that in the scenario where the stock is called, the shareholder has earned a 55.2% return from this trading level, in addition to any dividends collected before the stock was called.