How To YieldBoost SSTK To 19.4% Using Options

Shareholders of Shutterstock Inc (SSTK) looking to boost their income beyond the stock's 2.5% annualized dividend yield can sell the December covered call at the $55 strike and collect the premium based on the $6.00 bid, which annualizes to an additional 16.9% 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 $55 would be lost if the stock rises there and is called away, but SSTK shares would have to climb 15.9% from current levels for that to happen, meaning that in the scenario where the stock is called, the shareholder has earned a 28.6% return from this trading level, in addition to any dividends collected before the stock was called.