YieldBoost TEG From 3.8% To 5% Using Options

Shareholders of Integrys Energy Group Inc (TEG) looking to boost their income beyond the stock's 3.8% annualized dividend yield can sell the May 2015 covered call at the $75 strike and collect the premium based on the 45 cents bid, which annualizes to an additional 1.3% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 5% annualized rate in the scenario where the stock is not called away. Any upside above $75 would be lost if the stock rises there and is called away, but TEG shares would have to advance 4% from current levels for that to happen, meaning that in the scenario where the stock is called, the shareholder has earned a 4.6% return from this trading level, in addition to any dividends collected before the stock was called.
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