YieldBoost CPSI To 15% Using Options

Shareholders of Computer Programs & Systems Inc (CPSI) looking to boost their income beyond the stock's 4.9% annualized dividend yield can sell the June covered call at the $55 strike and collect the premium based on the $1.90 bid, which annualizes to an additional 10% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 15% annualized rate in the scenario where the stock is not called away. Any upside above $55 would be lost if the stock rises there and is called away, but CPSI shares would have to advance 5.8% from current levels for that to happen, meaning that in the scenario where the stock is called, the shareholder has earned a 9.5% return from this trading level, in addition to any dividends collected before the stock was called.