YieldBoost LCII To 13.6% Using Options
August 21, 2024 at 11:40 AM EDT
Shareholders of LCI Industries (LCII) looking to boost their income beyond the stock's 3.6% annualized dividend yield can sell the April 2025 covered call at the $125 strike and collect the premium based on the $7.50 bid, which annualizes to an additional 9.9% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 13.6% annualized rate in the scenario where the stock is not called away. Any upside above $125 would be lost if the stock rises there and is called away, but LCII shares would have to advance 8.5% from current levels for that to happen, meaning that in the scenario where the stock is called, the shareholder has earned a 15% return from this trading level, in addition to any dividends collected before the stock was called.