YieldBoost Live Oak Bancshares From 0.3% To 11.5% Using Options
May 08, 2024 at 11:43 AM EDT
Shareholders of Live Oak Bancshares Inc (LOB) looking to boost their income beyond the stock's 0.3% annualized dividend yield can sell the December covered call at the $40 strike and collect the premium based on the $2.40 bid, which annualizes to an additional 11.2% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 11.5% annualized rate in the scenario where the stock is not called away. Any upside above $40 would be lost if the stock rises there and is called away, but LOB shares would have to climb 15.2% from current levels for that to occur, meaning that in the scenario where the stock is called, the shareholder has earned a 22.1% return from this trading level, in addition to any dividends collected before the stock was called.