YieldBoost PriceSmart To 12.9% Using Options

Shareholders of PriceSmart Inc (PSMT) looking to boost their income beyond the stock's 0.8% annualized dividend yield can sell the January 2015 covered call at the $95 strike and collect the premium based on the $4.10 bid, which annualizes to an additional 12.1% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 12.9% annualized rate in the scenario where the stock is not called away. Any upside above $95 would be lost if the stock rises there and is called away, but PSMT shares would have to advance 4.6% from current levels for that to happen, meaning that in the scenario where the stock is called, the shareholder has earned a 9.1% return from this trading level, in addition to any dividends collected before the stock was called.