How To YieldBoost Amgen To 4.2% Using Options

Shareholders of Amgen Inc (AMGN) looking to boost their income beyond the stock's 2% annualized dividend yield can sell the January 2016 covered call at the $150 strike and collect the premium based on the $4.00 bid, which annualizes to an additional 2.1% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 4.2% annualized rate in the scenario where the stock is not called away. Any upside above $150 would be lost if the stock rises there and is called away, but AMGN shares would have to climb 24.4% from current levels for that to occur, meaning that in the scenario where the stock is called, the shareholder has earned a 27.7% return from this trading level, in addition to any dividends collected before the stock was called.