YieldBoost SWBI To 18.6% Using Options

Shareholders of Smith & Wesson Brands Inc (SWBI) looking to boost their income beyond the stock's 4.8% annualized dividend yield can sell the September covered call at the $12 strike and collect the premium based on the 90 cents bid, which annualizes to an additional 13.8% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 18.6% annualized rate in the scenario where the stock is not called away. Any upside above $12 would be lost if the stock rises there and is called away, but SWBI shares would have to climb 11.4% from current levels for that to happen, meaning that in the scenario where the stock is called, the shareholder has earned a 19.8% return from this trading level, in addition to any dividends collected before the stock was called.