How To YieldBoost Owens Corning To 15.5% Using Options
March 30, 2015 at 11:30 AM EDT
Shareholders of Owens Corning (OC) looking to boost their income beyond the stock's 1.6% annualized dividend yield can sell the August covered call at the $44 strike and collect the premium based on the $2.35 bid, which annualizes to an additional 13.9% rate of return against the current stock price (at Stock Options Channel we call this the YieldBoost), for a total of 15.5% annualized rate in the scenario where the stock is not called away. Any upside above $44 would be lost if the stock rises there and is called away, but OC shares would have to climb 2.7% from current levels for that to occur, meaning that in the scenario where the stock is called, the shareholder has earned a 8.2% return from this trading level, in addition to any dividends collected before the stock was called.